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UNITED STATES
    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
    FORM 10-K
    þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE  SECURITIES EXCHANGE ACT OF 1934  Commission File Number
    001-31451
   BEARINGPOINT, INC.
 (Exact name of Registrant as
    specified in its charter)
    DELAWARE

22-3680505(State or other jurisdiction
    of
    incorporation or organization)

(IRS Employer
    Identification No.)1676 International Drive,
    McLean, VA

22102(Address of principal executive
    offices)

(Zip
    Code)   (703) 747-3000
 (Registrants telephone
    number, including area code)
  Securities registered pursuant to Section 12 (b) of the
    Act:
  Common Stock, $.01 Par Value
  Series A Junior Participating Preferred Stock Purchase
    Rights
  Securities registered pursuant to Section 12 (g) of the
    Act: None
     o þ
  o þ
  o þ
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ




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TABLE OF
    CONTENTS
  PageDescription

NumberPART I.Item 1.


Business


1Item 1A.


Risk Factors


7Item 1B.


Unresolved Staff Comments


21Item 2.


Properties


21Item 3.


Legal Proceedings


22Item 4.


Submission of Matters to a Vote of
    Security Holders


25PART II.Item 5.


Market for the Registrants
    Common Equity, Related Stockholder Matters and Issuer Purchases
    of Equity Securities


27Item 6.


Selected Financial Data


30Item 7.


Managements Discussion and
    Analysis of Financial Condition and Results of Operations


33Item 7A.


Quantitative and Qualitative
    Disclosures About Market Risk


68Item 8.


Financial Statements and
    Supplementary Data


69Item 9.


Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure


69Item 9A.


Controls and Procedures


70Item 9A(T).


Controls and Procedures


77Item 9B.


Other Information


77PART III.Item 10.


Directors and Executive Officers
    of the Registrant


78Item 11.


Executive Compensation


81Item 12.


Security Ownership of Certain
    Beneficial Owners and Management and Related Stockholder Matters


101Item 13.


Certain Relationships and Related
    Transactions, and Director Independence


104Item 14.


Principal Accounting Fees and
    Services


105PART IV.Item 15.


Exhibits, Financial Statement
    Schedules


106Signatures


112




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PART I.  FORWARD-LOOKING
    STATEMENTS
  Form 10-K
  AVAILABLE
    INFORMATION
  www.bearingpoint.com. Form 10-K, Form 10-Q Form 8-K,
  Form 10-K,
  ITEM 1.
    BUSINESS  General
   1




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Strategy
    
    Focusing on Key Segments, Clients, Solutions and Geographies.We intend to play only where we can win. In 2006, we made
    continued progress in realigning our business to focus on the
    areas that offer the greatest growth and opportunity. We are
    also focused on higher-margin, higher-growth solutions with low
    capital requirements. We seek to divert resources away from
    non-strategic accounts and segments to focus on increasing our
    market share in critical, high-growth areas.
    Improving our Delivery Capability. To provide premium,
    cost-effective, high-quality technology services and solutions
    to global clients, we will continue to invest strategically in
    building our global delivery network, thereby scaling our
    low-cost resources. The anchors of our global network are China
    and India, supported by onshore and near-shore centers as
    appropriate. In 2006, we opened new Global Development Centers
    in Bangalore, India and Hattiesburg, Mississippi. We also
    continue to increase our capabilities in Shanghai and Dalian,
    China, and Sao Paulo, Brazil. To deliver seamless solutions on a
    global basis, we are driving increased adoption of our global
    delivery methodology.
    Expanding our Managed Services Business. We selectively
    focus on applications management in strategically identified
    industry sectors that are complementary to our systems
    integration business. Our goal is to increase our managed
    services revenue by supporting our own solutions in addition to
    targeted non-BearingPoint developed applications. By building a
    strong alliance partner network with applications providers such
    as SAP, Oracle, PeopleSoft, Siebel and Hyperion, we are
    well-positioned to architect solutions tailored to a
    clients specific needs with a single point of
    accountability.
    Improving our Cost Structure. To remain competitive, we
    strive to continually improve our operational discipline and
    streamline our cost base across all functions and business
    units. In 2006, for example, we reduced real estate costs by
    consolidating offices, including closing offices in four
    countries, without impacting our ability to serve clients. We
    continue to align our people pyramid, reducing the
    number of managing directors and senior managers, while
    increasing the number of analysts and consultants. We strive to
    manage risk in our portfolio, as well as the potential
    associated costs, through efforts such as a more stringent
    corporate deal review process and standardized contracting
    policies.
    Reducing Employee Attrition. As a professional services
    company, our employees are a key differentiator, and we must
    continue to focus on enhancing employee development, increasing
    employee ownership and taking other measures in order to reduce
    employee attrition. We are 2




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committed to increasing training and development opportunities
    for our employees through programs such as our new partnership
    with the Yale School of Management for world-class training, by
    rolling out career paths and core competencies for all of our
    employees, and by building a pay-for-performance culture at all
    levels.  
    Investing in our Business. We are seeking investment
    opportunities in key areas to drive future growth. For example,
    to remain on the leading edge of critical trends, issues and
    technologies that impact our clients, we are focused on
    developing horizontal and vertical end-to-end solutions that are
    based on repeatable innovation and delivered seamlessly to
    global clients. To increase awareness of the BearingPoint brand
    among clients and prospects, we launched a new brand strategy
    and more aggressive marketing efforts in late 2006.  North
    American Industry Groups
      
    Public Servicesserves a broad range of both public and
    private clients, including agencies of the U.S. Federal
    government such as the Departments of Defense, Homeland
    Security, Health and Human Services; provincial, state and local
    governments; public healthcare companies and private sector
    healthcare agencies; aerospace and defense companies; and higher
    education clients.    
    Commercial Servicessupports a highly diversified range
    of clients, including those in the technology, consumer markets,
    manufacturing, life sciences, transportation and communications
    sectors, as well as companies in the chemicals, oil and gas
    industries, and private and public utilities.
    Financial Servicesdirects its solutions to many of the
    worlds leading banking, insurance, securities, real
    estate, hospitality and professional services institutions. We
    strive to anticipate global industry trends, opportunities and
    needs, and then deliver solutions that transform our clients.
    These service offerings are designed to allow customers to
    capitalize on existing application systems and
    e-business
    strategies and development. We believe we have differentiated
    ourselves from our competition by combining in-depth technical
    knowledge of our customers markets with focused offerings.  International
    Operations
   3




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Global
    Development Centers
    Our
    Joint Marketing Relationships
      Competition
     4




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Intellectual
    Property
      Customer
    Dependence
   5




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Employees
        equity-based
  
    In December 2006, our shareholders approved amendments to our
    long-term incentive plan (LTIP) that, among other
    things, provided for a 25 million share increase in the
    number of shares authorized for equity awards made under the
    LTIP. The LTIP amendments enabled us to implement a new
    equity-based retention strategy, which we launched in February
    2007 by awarding approximately 21.9 million performance
    share units (PSUs) to our managing directors and a
    limited number of key employees. The PSUs vest in three years if
    we are able to achieve certain performance metrics. The program
    was designed to enhance retention of our current managing
    directors and to incent these individuals to drive Company
    performance. For additional information on the PSUs, see
    Item 7, Managements Discussion and Analysis of
    Financial Condition and Results of OperationsPrincipal
    Business Priorities for 2007 and Beyond, and Note 13,
    StockBased Compensation, of the Notes to
    Consolidated Financial Statements.
    In February 2007, we also granted performance cash awards
    providing for the payment of up to $50 million to a group
    of our managing directors and other high-performing senior-level
    employees. These cash retention awards generally are earned if
    we are able to achieve certain performance metrics, similar to
    those required under the PSU program. These performance cash
    awards were designed to retain our existing employees by
    diversifying their performance awards between cash and equity
    awards. For additional information on the performance cash
    awards, see Item 7, Managements Discussion and
    Analysis of Financial Condition and Results of
    OperationsPrincipal Business Priorities for 2007 and
    Beyond, and Note 13, StockBased
    Compensation, of the Notes to Consolidated Financial
    Statements. 6




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
    In November 2006, we began our partnership with Yale University
    to create the BearingPoint Leadership Program at the Yale School
    of Management, an innovative education and training program
    focusing on career and leadership development for our employees.
    We believe that our collaboration with Yale will offer our
    employees and new recruits with a unique learning experience
    that will help improve our ability to recruit and retain
    talented and motivated employees, enhance the quality of the
    services we deliver to our clients and cultivate a shared set of
    values, skills and culture that we hope will come to define a
    career with us.
    As part of our increased emphasis on a pay for
    performance compensation structure, we introduced
    performance-based cash bonus incentives in 2006. In 2006, we
    paid performance-based cash bonuses in an aggregate amount of
    $16 million to select staff-level employees, based on 2005
    performance. Through June 2007, we have paid performance-based
    cash bonuses totaling approximately $50 million
    ($34 million to staff, $17 million to managing
    directors), based on 2006 performance. We believe the payment of
    a bonus for 2006 performance was appropriate, for retention
    purposes and because we were able to sustain our underlying
    operations and our core business continued to perform, despite
    the issues we continue to face with respect to our financial
    accounting systems and efforts to become timely in our SEC
    periodic filings.
    Under our BE an Owner program, eligible employees
    below the managing director level were intended to receive a
    stock grant equivalent to 3% of their annual salaries as of
    October 3, 2005. In January 2006, we paid the first half of
    the amount (1.5% of annual salary as of October 3,
    2005) to our eligible employees in cash, in an aggregate
    amount of $18.4 million. After we have become current in
    our SEC periodic filings and we are able to issue freely
    tradable shares of our common stock, we intend to make a special
    contribution of approximately $14 million (the remaining
    1.5% of annual salary as of October 3, 2005) under our
    Employee Stock Purchase Plan (the ESPP) on behalf of
    these eligible employees, which will be used to purchase shares
    of our common stock pursuant to the terms of the ESPP.  Background
  22102-4828.
    ITEM 1A.
    RISK
    FACTORS  Risks
    that Relate to our Failure to Timely File Periodic Reports with
    the SEC and our Internal Control over Financial
    Reporting
   7




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and/or
  Our continuing failure to timely file certain periodic
    reports with the SEC poses significant risks to our business,
    each of which could materially and adversely affect our
    financial condition and results of operations.
  Forms 10-K Forms 10-Q
    
    If we are not timely in filing our periodic reports by
    October 31, 2008, (i) a breach could be declared by
    our lenders under our senior secured credit facility, which may
    result in the lenders declaring our outstanding loans due and
    payable in whole or in part, and potentially resulting in a
    cross-default to one or more series of our convertible
    subordinated debentures and other indebtedness,
    and/or
    (ii) a breach could be claimed by holders of one or more
    series of our subordinated debentures resulting in a
    cross-default under our senior secured credit facility. See
    Risks that Relate to Our Liquidity.
    If the NYSE ceases to grant us extensions to file our periodic
    reports with the NYSE, it has the right to begin proceedings to
    delist our common stock. A delisting of our common stock would
    have a material adverse effect on us by, among other things:  
    reducing the liquidity and market price of our common stock;
    resulting in a possible event of default under and acceleration
    of our senior secured credit facility and triggering a right to
    the holders of our debentures to request us to repurchase all
    then outstanding debentures; and
    reducing the number of investors willing to hold or acquire our
    common stock, thereby restricting our ability to obtain equity
    financing.  
    We may have difficulty retaining our clients and obtaining new
    clients.
    We are not eligible to use a registration statement to offer and
    sell freely tradable securities, which prevents us from
    accessing the public capital markets or delivering shares under
    our equity plans.
    Because we are not current in our SEC periodic filings,
    significant features of many of our employee equity plans remain
    suspended and our employees have effectively been precluded from
    realizing the appreciation in equity-based awards. The longer we
    are unable to deliver shares for purchase under our ESPP, the
    higher likelihood that we may experience increased rates of
    withdrawals by our employees of their accumulated contributions
    to our ESPP. For more information, see Risks that
    Relate to our Liquidity.   8




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In 2004, we identified material weaknesses in our internal
    control over financial reporting, the remediation of which has
    materially and adversely affected our business and financial
    condition, and as of December 31, 2006, these material
    weaknesses remain.
           9




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We face risks related to securities litigation and
    regulatory actions that could adversely affect our financial
    condition and business.
  class-action
      Risks
    that Relate to Our Business
  Our business may be adversely impacted as a result of
    changes in demand, both globally and in individual market
    segments, for our consulting and systems integration
    services.
      Our operating results will suffer if we are not able to
    maintain our billing and utilization rates or control our
    costs.
   10




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
    our clients perception of our ability to add value through
    our services;
    our ability to access and use of lower-cost service delivery
    personnel, as compared to the ability of our competitors to do
    so;
    introduction of new services or products by us or our
    competitors;
    pricing policies of our competitors; and
    general economic conditions in the United States and abroad.    
    seasonal trends, primarily as a result of our hiring cycle and
    holiday and summer vacations;
    our ability to transition employees from completed projects to
    new engagements;
    our ability to forecast demand for our services and thereby
    maintain an appropriately balanced and sized workforce;
    our ability to manage attrition; and
    our ability to mobilize our workforce quickly or economically,
    especially outside the United States.    We continue to incur selling, general and administrative
    (SG&A) expenses at levels significantly higher
    than those of our competitors. If we are unable to significantly
    reduce SG&A expenses over the near term, our ability to
    achieve, and make significant improvements in, net income and
    profitability will remain in jeopardy.
      
    improving our controls around the financial closing process;
    remediating deficiencies in our internal controls;
    reducing the amount of time and effort spent to substantiate the
    accuracy and completeness of our financial results;
    reducing redundant systems and activities;
    streamlining the input and capture of data; and 11




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
    hiring and retaining skilled finance and accounting personnel
    while decreasing the number of personnel required to support our
    financial close process, including reliance on contractors.    The systems integration consulting markets are highly
    competitive, and we may not be able to compete effectively if we
    are not able to maintain our billing rates or control our costs
    related to these engagements.
    Contracting with the Federal government is inherently
    risky and exposes us to risks that may materially and adversely
    affect our business.
    
    Our government contracts are subject to laws and regulations
    that provide government clients with rights and remedies not
    typically found in commercial contracts, which are unfavorable
    to us. These rights and remedies allow government clients, among
    other things, to:  
    establish temporary holdbacks of funds due and owed to us under
    contracts for various reasons;
    terminate our facility security clearances and thereby prevent
    us from receiving classified contracts;
    cancel multi-year contracts and related orders if funds for
    contract performance for any subsequent year become unavailable;
    claim rights in products, systems and technology produced by us;
    prohibit future procurement awards with a particular agency if
    it is found that our prior relationship with that agency gives
    us an unfair advantage over competing contractors;
    subject the award of contracts to protest by competitors, which
    may require the suspension of our performance pending the
    outcome of the protest or our resubmission of a bid for the
    contract, or result in the termination, reduction or
    modification of the awarded contract; and
    prospectively reduce our pricing based upon achieving certain
    agreed service volumes or other metrics and reimburse any
    previously charged amounts subsequently found to have been
    improperly charged under the contract.  
    Our failure to obtain and maintain necessary security clearances
    may limit our ability to perform classified work for government
    clients, which could cause us to lose business. In addition,
    security breaches in sensitive government systems that we have
    developed could damage our reputation and eligibility for
    additional work and expose us to significant losses.
    The Federal government audits and reviews our performance on
    contracts, pricing and cost allocation practices, cost
    structure, systems, and compliance with applicable laws,
    regulations and standards. If 12




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the government finds that our costs are not reimbursable, have
    not been properly determined or are based on outdated estimates
    of our costs, we may not be allowed to bill for all or part of
    those costs, or we may have to refund cash that we have already
    collected, which may materially affect our operating margin and
    the expected timing of our cash flows.  
    Government contracting officers have wide latitude in their
    ability to conclude as to the financial responsibility of
    companies that contract with agencies of the U.S. Federal
    government. Officers who conclude that a company is not
    financially responsible may withhold new engagements and
    terminate recently contracted engagements for which significant
    expenditures and outlays already may have been made.
    If the government uncovers improper or illegal activities in the
    course of audits or investigations, we may be subject to civil
    and criminal penalties and administrative sanctions, including
    termination of contracts, forfeiture of profits, suspension of
    payments, fines and suspension or debarment from doing business
    with Federal government agencies. These consequences could
    materially and adversely affect our revenue and operating
    results. The inherent limitations of internal controls, even
    when adequate, may not prevent or detect all improper or illegal
    activities.
    Government contracts, and the proceedings surrounding them, are
    often subject to more extensive scrutiny and publicity than
    other commercial contracts. Negative publicity related to our
    government contracts, regardless of its accuracy, may further
    damage our business by affecting our ability to compete for new
    contracts.    Our ability to attract, retain and motivate our managing
    directors and other key employees is critical to the success of
    our business. We continue to experience sustained,
    higher-than-industry average levels of voluntary turnover among
    our workforce, which has impacted our ability to grow our
    business.
    Our contracts can be terminated by our clients with short
    notice, or our clients may cancel or delay projects.
  engagement-by-engagement
 13




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If we are not able to keep up with rapid changes in
    technology or maintain strong relationships with software
    providers, our business could suffer.
      Loss of our joint marketing relationships could reduce our
    revenue and growth prospects.
    We are not likely to be able to significantly grow our
    business through mergers and acquisitions in the near
    term.
    There will not be a consistent pattern in our financial
    results from quarter to quarter, which may result in increased
    volatility of our stock price.
    
    the business decisions of our clients regarding the use of our
    services;
    seasonality, including the number of work days and holidays and
    summer vacations;
    the stage of completion of existing projects or their
    termination;
    cost overruns or revenue write-offs resulting from unexpected
    delays or delivery issues on engagements; 14




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
    periodic differences between our clients estimated and
    actual levels of business activity associated with ongoing
    engagements;
    our ability to transition employees quickly from completed
    projects to new engagements;
    the introduction of new products or services by us or our
    competitors;
    changes in our pricing policies or those of our competitors;
    our ability to manage costs, including personnel costs and
    support services costs, particularly outside the United States
    where local labor laws may significantly affect our ability to
    mobilize personnel quickly or economically;
    currency exchange fluctuations;
    ongoing costs associated with our efforts to remediate material
    weaknesses in our internal control over financial reporting, and
    to produce timely and accurate financial information despite the
    continuing existence of these material weaknesses;
    changes in, or the application of changes to, accounting
    principles generally accepted in the United States, particularly
    those related to revenue recognition; and
    global, regional and local economic and political conditions and
    related risks, including acts of terrorism.  Our profitability may decline due to financial, regulatory
    and operational risks inherent in worldwide operations.
      We may bear the risk of cost overruns relating to our
    services, thereby adversely affecting our profitability.
   15




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We may face legal liabilities and damage to our
    professional reputation from claims made against our
    work.
    Our services may infringe upon the intellectual property
    rights of others.
    We have only a limited ability to protect our intellectual
    property rights, which are important to our success.
     16




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Risks
    that Relate to Our Liquidity
  Our current cash resources might not be sufficient to meet
    our expected cash needs over time.
      We have been unable to issue shares of our common stock
    under our ESPP since February 1, 2005. The longer we are
    unable to issue shares of our common stock, the more likely our
    ESPP participants may elect to withdraw their accumulated cash
    contributions from the ESPP at rates higher than those we have
    historically experienced.
    Our 2007 Credit Facility imposes a number of restrictions
    on the way in which we operate our business and may negatively
    affect our ability to finance future needs, or do so on
    favorable terms. If we violate these restrictions, we will be in
    default under the 2007 Credit Facility, which may cross-default
    to our other indebtedness.
   17




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If we cannot generate positive cash flow from our
    operations, we eventually may not be able to service our
    indebtedness.
    We may be unable to obtain new surety bonds, letters of
    credit or bank guarantees in support of client engagements on
    acceptable terms.
    Downgrades of our credit ratings may increase our
    borrowing costs and materially and adversely affect our
    financial condition.
      Our leverage may adversely affect our business and
    financial performance and may restrict our operating
    flexibility.
    
    limit cash flow available for general corporate purposes, such
    as capital expenditures;
    limit our ability to obtain, or obtain on favorable terms,
    additional debt financing in the future for working capital or
    capital expenditures;
    limit our flexibility in reacting to competitive and other
    changes in our industry and economic conditions generally;
    expose us to a risk that a substantial decrease in net operating
    cash flows due to economic developments or adverse developments
    in our business could make it difficult to meet debt service
    requirements; and
    expose us to risks inherent in interest rate fluctuations
    because borrowings may be at variable rates of interest, which
    could result in high interest expense in the event of increases
    in interest rates. 18




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The holders of our debentures have the right, at their
    option, to require us to purchase some or all of their
    debentures upon certain dates or upon the occurrence of certain
    designated events, which could have a material adverse effect on
    our liquidity.
      Risks
    that Relate to Our Common Stock
  The price of our common stock may decline due to the
    number of shares that may be available for sale in the
    future.
      Initial Per Share




TotalConversion


Initial

ApproximatePrice/Exercise


Conversion

Number ofConvertible Debt and Warrants

Price


Dates

Shares$250.0 million 2.50%
    Series A Convertible Subordinated Debentures due 2024

$
10.50


None (1)


23.8 million$200.0 million 2.75%
    Series B Convertible Subordinated Debentures due 2024

$
10.50


None (1)


19.0 million$200.0 million
    5.0% Convertible Senior Subordinated Debentures due 2025

$
6.60


April 27, 2005


30.3 million$40.0 million
    0.50% Convertible Senior Subordinated Debentures due 2010

$
6.75


July 15, 2006


5.9 millionWarrants issued in connection with
    the July 2005 Senior Debentures

$
8.00


July 15, 2006


3.5 millionTotal








82.5 million     (1)
    
    The holders of the Series A
    Debentures and Series B Debentures have the right to
    convert the debentures into shares of common stock only upon the
    occurrence of certain triggering events.   19




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Exercise PriceNumber of Shares

Range


Average


Calendar Year1,470,000


$
5.72  $10.00


$
8.28



2007
(remainder of 2007)961,000



5.72  8.77



8.06



2008713,000



7.20  8.70



7.85



2009     Number of Shares

Calendar Year8,717,582


20074,138,191


200830,839,099


2009 and thereafter     There are significant limitations on the ability of any
    person or company to acquire the Company without the approval of
    our Board of Directors.
   20




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
    our Board of Directors is classified into three classes, each of
    which will serve for staggered three-year terms;
    a director may be removed by our stockholders only for cause and
    then only by the affirmative vote of two-thirds of our voting
    stock;
    only our Board of Directors or the Chairman of our Board of
    Directors may call special meetings of our stockholders;
    our stockholders may not take action by written consent;
    our stockholders must comply with advance notice procedures in
    order to nominate candidates for election to our Board of
    Directors or to place stockholders proposals on the agenda
    for consideration at meetings of the stockholders;
    if stockholder approval is required by applicable law, any
    mergers, consolidations and sales of all or substantially all of
    our assets must be approved by the affirmative vote of at least
    two-thirds of our voting stock; and
    our stockholders may amend or repeal any of the foregoing
    provisions of our certificate of incorporation or our bylaws
    only by a vote of two-thirds of our voting stock.  ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES     21




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ITEM 3.
    LEGAL
    PROCEEDINGS  Overview
    
    Claims and investigations arising from our continuing inability
    to timely file periodic reports under the Exchange Act, and the
    restatement of our financial statements for certain prior
    periods to correct accounting errors and departures from
    generally accepted accounting principles for those years
    (SEC Reporting Matters);
    Claims and investigations being conducted by agencies or
    officers of the U.S. Federal government and arising in
    connection with our provision of services under contracts with
    agencies of the U.S. Federal government (Government
    Contracting Matters); and
    Claims made in the ordinary course of business by clients
    seeking damages for alleged breaches of contract or failure of
    performance, by current or former employees seeking damages for
    alleged acts of wrongful termination or discrimination, and by
    creditors or other vendors alleging defaults in payment or
    performance (Other Matters).    SEC
    Reporting Matters
  2005 Class Action Suits. Rule 10b-5 Makor Issues & Rights, Ltd v. Tellabs Tellabs
  2005 Shareholders Derivative Demand. Form 8-K,
 22




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SEC Investigation. Form 8-K.
    Government
    Contracting Matters
  California Subpoenas.
  Core Financial Logistics System.
 23




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Other
    Matters
  Peregrine Litigation.
  In re Peregrine Systems, Inc.
    Securities Litigation
    Series B Debenture Suit.
       24




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ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    Election of Directors.
  Nominee

For


WithholdClass II
    Directors:Wolfgang Kemna


146,986,049



15,119,408Albert L. Lord


150,959,411



11,146,046J. Terry Strange


147,088,156



15,017,301Class III
    Directors:Roderick C. McGeary


160,035,388



2,070,069Harry L. You


160,822,084



1,283,373   Approval of Amended and Restated BearingPoint, Inc. 2000
    Long-Term Incentive Plan
  For

Against


Abstain122,729,827


37,623,511



1,752,079   Ratification of Appointment of PricewaterhouseCoopers
    LLP.
  For

Against


Abstain155,829,428


5,636,361



68,896  25




---



##### 



Executive
    Officers of the Company
    Judy A. Ethell
  F. Edwin Harbach
  Laurent C. Lutz,
  Roderick C. McGeary
  Harry L. You
       26




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##### 



PART II.  ITEM 5.
    MARKET
    FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information
    Form 10-K Form 10-K Form 10-K Form 10-K
    Price
    Range of Common Stock
  Price Range ofCommon StockHigh


LowFiscal Year 2007Second Quarter (as of June 22)

$
8.00


$
6.90First Quarter


8.56



7.33Fiscal Year 2006Fourth Quarter


8.89



7.44Third Quarter


9.00



7.36Second Quarter


9.59



7.55First Quarter


9.16



7.77Fiscal Year 2005Fourth Quarter


7.99



6.54Third Quarter


8.50



7.27Second Quarter


8.82



4.65First Quarter


8.89



7.34Fiscal Year 2004Fourth Quarter


9.98



7.29Third Quarter


9.25



7.22Second Quarter


11.00



8.03First Quarter


11.30



9.50  27




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##### 



Holders
    Dividends
    Issuer
    Purchases of Equity Securities
      Sales
    of Securities Not Registered Under the Securities
    Act
    
    On December 22, 2004, we completed the sale of the
    $225.0 million aggregate principal amount of our 2.50%
    Series A Convertible Subordinated Debentures due 2024 (the
    Series A Debentures) and the
    $175.0 million aggregate principal amount of our 2.75%
    Series B Convertible Subordinated Debentures due 2024 (the
    Series B Debentures).
    On January 5, 2005, we completed the sale of an additional
    $25.0 million aggregate principal amount of our
    Series A Debentures and an additional $25.0 million of
    our Series B Debentures.
    On April 27, 2005, we completed the sale of the
    $200.0 million aggregate principal amount of our
    5.00% Convertible Senior Subordinated Debentures due 2025
    (the April 2005 Senior Debentures).
    On July 15, 2005, we completed the sale of the
    $40.0 million aggregate principal amount of our 0.50%
    Convertible Senior Subordinated Debentures due July 2010 (the
    July 2005 Senior Debentures) and common stock
    warrants (the July 2005 Warrants) to purchase up to
    3.5 million shares of our common stock. 28




---



##### 



Equity
    Compensation Plan Information 
    (as of December 31, 2006)
  (a)


(b)


(c)Number of securitiesremaining availableNumber of securities


Weighted-average


for future issuanceto be issued upon


exercise price of


under equityexercise of


outstanding


compensation plansoutstanding options,


options, warrants


(excluding securitiesPlan Category

warrants and rights


and rights


reflected in column (a))Equity Compensation Plans Approved
    by Security Holders


53,844,732


$
11.10



58,768,750
(1)(2)Equity Compensation Plans Not
    Approved by Security Holders










Total


53,844,732


$
11.10



58,768,750     (1)
    
    Includes 35,019,474 shares of
    common stock available for grants of stock options, restricted
    stock, stock appreciation rights and other stock-based awards
    under our LTIP and 23,749,276 shares of common stock
    available for issuance under our ESPP.(2)
    
    Under our LTIP, the number of
    shares of common stock authorized for grants or awards under the
    plan is 92,179,333. Under our ESPP, the number of shares of our
    common stock available for purchase is 3,766,096 shares,
    plus an annual increase on the first day of each of our fiscal
    years beginning on July 1, 2001 and ending on June 30,
    2026 equal to the lesser of (i) 30 million shares,
    (ii) three percent of the shares outstanding on the last
    day of the immediately preceding fiscal year or (iii) a
    lesser number of shares as determined by our Board of Directors
    or the Compensation Committee of the Board.  Other
    Equity Plan Information
   29




---



##### 



COMPARATIVE
    STOCK PERFORMANCE
      
  ITEM 6.
    SELECTED
    FINANCIAL DATA   30




---



##### 



Statements
    of Operations
  Six MonthsYear Ended


Ended


Year EndedDecember 31,


December 31,


December 31,


December 31,


June 30,


June 30,2006


2005


2004


2003


2003


2002(unaudited)(in thousands, except per share amounts)Revenue

$
3,444,003


$
3,388,900


$
3,375,782


$
1,522,503


$
3,157,898


$
2,383,099Costs of service:Costs of service


2,863,856



3,001,327



2,816,559



1,221,249



2,436,864



1,761,444Lease and facilities restructuring
    charge


29,621



29,581



11,699



61,436



17,283



Impairment charges






















23,914Total costs of service


2,893,477



3,030,908



2,828,258



1,282,685



2,454,147



1,785,358Gross profit


550,526



357,992



547,524



239,818



703,751



597,741Amortization of purchased
    intangible assets


1,545



2,266



3,457



10,212



45,127



3,014Goodwill impairment charge (1)






166,415



397,065



127,326







Selling, general and administrative
    expenses


748,250



750,867



641,176



272,250



550,098



477,230Operating income (loss)


(199,269
)


(561,556
)


(494,174
)


(169,970
)


108,526



117,497Insurance settlement


38,000



















Interest / other income (expense),
    net (2)


(19,774
)


(37,966
)


(17,644
)


(1,773
)


(10,493
)


1,217Loss on early extinguishment of debt










(22,617
)










Income (loss) before taxes and
    cumulative effect of change in accounting principle


(181,043
)


(599,522
)


(534,435
)


(171,743
)


98,033



118,714Income tax expense (3)


32,397



122,121



11,791



4,872



65,342



80,263Income (loss) before cumulative
    effect of change in accounting principle


(213,440
)


(721,643
)


(546,226
)


(176,615
)


32,691



38,451Cumulative effect of change in
    accounting principle, net of tax (4)






















(79,960
)Net income (loss) applicable to
    common stockholders (5)

$
(213,440
)

$
(721,643
)

$
(546,226
)

$
(176,615
)

$
32,691


$
(41,509
)Earnings (loss) per
    sharebasic and diluted:Income (loss) before cumulative
    effect of change in accounting principle applicable to common
    stockholders

$
(1.01
)

$
(3.59
)

$
(2.77
)

$
(0.91
)

$
0.18


$
0.24Cumulative effect of change in
    accounting principle






















(0.50
)Net income (loss) applicable to
    common stockholders

$
(1.01
)

$
(3.59
)

$
(2.77
)

$
(0.91
)

$
0.18


$
(0.26
)  31




---



##### 



Balance
    Sheet Data
  December 31,


December 31,


December 31,


December 31,


June 30,


June 30,2006


2005


2004


2003


2003


2002(unaudited)(in thousands)Cash, cash equivalents, and
    restricted cash (6)

$
392,668


$
376,587


$
265,863


$
122,475


$
121,790


$
222,636Total assets


1,939,240



1,972,426



2,182,707



2,211,613



2,150,210



948,029Long-term liabilities


1,078,930



976,501



648,565



408,324



375,991



28,938Total debt


671,850



674,760



423,226



248,228



277,176



1,846Total liabilities


2,116,541



2,017,998



1,558,009



1,141,618



1,006,990



384,935Total stockholders equity
    (deficit)


(177,301
)


(45,572
)


624,698



1,069,995



1,143,220



563,094     (1)
    
    During the years ended
    December 31, 2005 and 2004 and the six months ended
    December 31, 2003, we recorded goodwill impairment charges
    of $166.4 million, $397.1 million and
    $127.3 million, respectively. For additional information
    regarding these goodwill impairment charges and international
    acquisitions, see Note 5, Business Acquisitions,
    Goodwill and Other Intangible Assets, of the Notes to
    Consolidated Financial Statements.(2)
    
    During the year ended
    December 31, 2004, we recorded a change in accounting
    principle resulting in a charge of $0.5 million related to
    the elimination of a one-month lag in reporting for certain Asia
    Pacific subsidiaries, as well as a subsidiary within the EMEA
    region. While the elimination of the one-month lag is considered
    a change in accounting principle, the effect of the change is
    included in other income (expense) due to the immateriality of
    the change in relation to consolidated net loss.(3)
    
    During the year ended
    December 31, 2005, we recorded a valuation allowance of
    $55.3 million, primarily against our U.S. deferred tax
    assets to reflect our conclusions that it is more likely than
    not that these tax benefits would not be realized. For
    additional information, see Note 14, Income
    Taxes, of the Notes to Consolidated Financial Statements.(4)
    
    During the year ended June 30,
    2002, we recognized a transitional impairment loss of
    $80.0 million as the cumulative effect of a change in
    accounting principle in connection with adopting Statement of
    Financial Accounting Standards No. 142, Goodwill and
    Other Intangible Assets.(5)
    
    During the fourth quarter of 2006,
    the one-month reporting lag in the remaining EMEA entities was
    eliminated. The elimination of one month of activity increased
    our 2006 consolidated net loss for the year ended
    December 31, 2006 by $1.2 million.(6)
    
    Restricted cash amounts at
    December 31, 2006, 2005 and 2004 were $3.1 million,
    $121.2 million and $21.1 million, respectively. As of
    December 31, 2003, June 30, 2003 and June 30,
    2002, there was no restricted cash. 32




---



##### 



ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following Managements Discussion and Analysis of
    Financial Condition and Results of Operations
    (MD&A) should be read in conjunction with the
    Consolidated Financial Statements and the Notes to Consolidated
    Financial Statements included elsewhere in this Annual Report.
    This Annual Report contains forward-looking statements that
    involve risks and uncertainties. See Forward-Looking
    Statements.
  Overview
      Economic and Industry Factors
      Revenue and Income Drivers
   33




---



##### 



Key Performance Indicators
    
    Bookings. We believe that information regarding our new
    contract bookings provides useful trend information regarding
    how the volume of our new business changes over time. Comparing
    the amount of new contract bookings and revenue provides us with
    an additional measure of the short-term sustainability of
    revenue growth. Information regarding our new bookings should
    not be compared to, or substituted for, an analysis of our
    revenue over time. There are no third-party standards or
    requirements governing the calculation of bookings. New contract
    bookings are recorded using then existing currency exchange
    rates and are not subsequently adjusted for currency
    fluctuations. These amounts represent our estimate at contract
    signing of the net revenue expected over the term of that
    contract and involve estimates and judgments regarding new
    contracts as well as renewals, extensions and additions to
    existing contracts. Subsequent cancellations, extensions and
    other matters may affect the amount of bookings previously
    reported. Bookings do not include potential revenue that could
    be earned from a client relationship as a result of future
    expansion of service offerings to that client, nor does it
    reflect option years under contracts that are subject to client
    discretion. In addition, government contracts or work orders are
    not included in bookings until related appropriations spending
    has been properly approved and, then, only to the extent of the
    amount of spending approved. Consequently, there can be
    significant differences between the times of contract signing
    and new contract booking recognition. Although our level of
    bookings provides an indication of how our business is
    performing, we do not characterize our bookings, or our
    engagement contracts associated with new bookings, as backlog
    because our engagements generally can be cancelled or terminated
    on short notice or without notice.
    Revenue Growth. Unlike bookings, which provide only a
    general sense of future expectations, period-over-period
    comparisons of revenue provide a meaningful depiction of how
    successful we have been in growing our business over time. 34




---



##### 




    Gross Margin (gross profit as a percentage of revenue).
    Gross margin is a meaningful tool for monitoring our ability to
    control our costs of services. Analysis of the various cost
    elements, including professional compensation expense, effects
    of foreign exchange rate changes and the use of subcontractors,
    as a percentage of revenue over time can provide additional
    information as to the key challenges we are facing in our
    business. The cost of subcontractors is generally more expensive
    than the cost of our own workforce and can negatively impact our
    gross profit. While the use of subcontractors can help us to win
    larger, more complex deals, and also may be mandated by our
    clients, we focus on limiting the use of subcontractors whenever
    possible in order to minimize our costs. We also utilize certain
    adjusted gross margin metrics in connection with the vesting and
    settlement of certain employee incentive awards. For a
    discussion of these metrics, see Item 11, Executive
    CompensationCompensation Discussion and Analysis.
    Utilization. Utilization represents the percentage of
    time our consultants are performing work, and is defined as
    total hours charged to client engagement or to non-chargeable
    client-relationship projects divided by total available hours
    for any specific time period, net of holiday and paid vacation
    hours. In 2006, we changed how we define utilization to make
    this metric more consistent with how we believe our industry
    peer group measures this metric. Utilization percentages for
    2005 set forth herein have been adjusted to conform to this new
    definition.
    Days Sales Outstanding (DSO). DSO is an
    operational metric that approximates the amount of earned
    revenue that remains unpaid by clients at a given time. DSOs are
    derived by dividing the sum of our outstanding accounts
    receivable and unbilled revenue, less deferred revenue, by our
    average net revenue per day. Average net revenue per
    day is determined by dividing total net revenue for the
    most recently ended trailing twelve-month period by 365.
    Free Cash Flow. Free cash flow is calculated by
    subtracting purchases of property and equipment from cash
    provided by operating activities. We believe free cash flow is a
    useful measure because it allows better understanding and
    assessment of our ability to meet debt service requirements and
    the amount of recurring cash generated from operations after
    expenditures for fixed assets. Free cash flow does not represent
    our residual cash flow available for discretionary expenditures
    as it excludes certain mandatory expenditures such as repayment
    of maturing debt. We use free cash flow as a measure of
    recurring operating cash flow. Free cash flow is a non-GAAP
    financial measure. The most directly comparable financial
    measure calculated in accordance with generally accepted
    accounting principles in the United States of America
    (GAAP) is net cash provided by operating activities.
    Attrition. Attrition, or voluntary total employee
    turnover, is calculated by dividing the number of our employees
    who have chosen to leave the Company within a certain period by
    the total average number of all employees during that same
    period. Our attrition statistic covers all of our employees,
    which we believe provides metrics that are more compatible with,
    and comparable to, those of our competitors.    2006
    Highlights
   35




---



##### 




    New contract bookings for 2006 were $3,130.0 million, a
    slight decrease from new contract bookings of
    $3,130.7 million for 2005. We experienced strong bookings
    growth in all of our industry groups other than Commercial
    Services and Financial Services, with the most notable growth in
    our EMEA and Public Services industry groups. Commercial
    Services bookings were significantly lower when compared
    year-over-year, primarily due to 2005 bookings in excess of
    $100 million related to the signing of our contract with
    Hawaiian Telcom Communications, Inc. (the HT
    Contract), one of the largest contracts in our history.
    The short-term uncertainty and confusion precipitated by the
    dispute with certain holders of our Series B Debentures
    also appears to have had some temporary effect on bookings
    during the fourth quarter of 2006, particularly in our Financial
    Services business unit, which resulted in a year-over-year
    decrease in bookings for that business unit and can be expected
    to impact its revenue in early 2007. New contract bookings for
    the three months ended March 31, 2007 were approximately
    $709.5 million, compared with new contract bookings of
    $804.6 million for the three months ended March 31,
    2006. Bookings growth in our international operations was not
    sufficient to offset contraction in our North American industry
    groups. In North America, Public Service bookings appear to have
    been impacted by increasing uncertainty surrounding the timing
    of approval of various Federal contract appropriations being
    precipitated by various factors, including ongoing congressional
    debates regarding military operations in Iraq and Afghanistan
    and the 2008 Federal budget. Year-over-year decreases in Public
    Services bookings for the three months ended March 31, 2007
    are substantially attributable to growth in the first quarter of
    2007 of the total contract value of new Federal contracts signed
    for which appropriations approval remained pending
    (unfunded Federal contracts) at March 31, 2007.
    We do not record unfunded Federal contracts as new contract
    bookings while appropriation approvals remain pending as there
    can be no assurances that these approvals will be forthcoming in
    the near future, if at all. Public Services bookings were also
    affected by one exceptionally large booking in our State, Local
    and Education (SLED) sector in the first quarter of
    2005. Outside of our Public Services business unit, new contract
    bookings in North America were also negatively affected by
    commercial clients segregating larger projects into series of
    smaller work orders.
    Our revenue for 2006 was $3,444.0 million, representing an
    increase of $55.1 million, or 1.6%, over 2005 revenue of
    $3,388.9 million. Significant revenue increases in Asia
    Pacific, Public Services and EMEA were substantially offset by
    Commercial Services revenue declines and reversals attributable
    to the settlement of disputes with two significant
    telecommunications industry clients.
    Our gross profit for 2006 was $550.5 million, compared to
    $358.0 million for 2005. Gross profit as a percentage of
    revenue increased to 16.0% during 2006 from 10.6% during 2005.
    Revenue increases, as well as reductions in professional
    compensation expense and other direct contract expenses, were
    relatively equal contributors to this improvement.
    During 2006 and 2007, we worked with Hawaiian Telcom
    Communications, Inc., a telecommunications industry client
    (HT), to resolve issues relating to our delivery of
    services for the design, build and operation of various
    information technology systems. On February 8, 2007, we
    entered into a Settlement Agreement and Transition Agreement
    with HT. Pursuant to the Settlement Agreement, we paid
    $52 million, $38 million of which was paid by certain
    of our insurers. In 36




---



##### 



addition, we waived approximately $29.6 million of invoices
    and other amounts otherwise payable by HT to the Company. The
    Transition Agreement governed our transitioning of the remaining
    work under the HT Contract to a successor provider, which has
    been completed. In 2006 and 2005, we incurred losses of
    $28.2 million and $111.7 million, respectively, under
    the HT Contract.  
    On June 18, 2007, we entered into a settlement with a
    telecommunications industry client resolving the clients
    claims under a client-initiated audit of certain of
    the Companys time and expense charges relating to an
    engagement that closed in 2003. In connection with the
    settlement, we will make six equal annual payments to the client
    in an aggregate amount of $24 million, with the first
    payment made on the signing date in return for a full release of
    the clients claims. While this settlement provides us with
    the opportunity to perform services for this client in the
    future, the dispute has and will likely continue to negatively
    affect the level of new bookings anticipated from this client in
    2007.
    On May 22, 2007, we settled certain disputes with KPMG that
    had arisen between our companies related to the February 2001
    Transition Services Agreement. KPMG had asserted that we were
    liable to it for approximately $31 million under the
    Transition Services Agreement for certain technology service
    termination costs. While neither company admitted any liability
    under these claims, these claims were mutually released. In
    addition, we agreed to amend a number of real estate subleases
    between KPMG and BearingPoint, and consent to the further
    subletting of others. The settlement further involves cash
    payments by us to KPMG of $5 million over a three-year time
    frame.
    We incurred SG&A expenses of $748.3 million in 2006,
    representing a decrease of $2.6 million, or 0.3%, from
    SG&A expenses of $750.9 million in 2005. While we
    achieved costs savings by reducing the size of our sales force
    and other business development expenses, these cost savings were
    significantly offset by continuing increases in our finance and
    accounting costs, primarily for sub-contracted labor and other
    costs related to the closing of our 2005 financial statements,
    and charges related to our agreement with Yale University.
    During 2006, we incurred external costs related to the closing
    of our financial statements of approximately
    $128.2 million, compared to approximately
    $94.6 million for 2005. We currently expect our costs for
    2007 related to these efforts to be approximately
    $68 million.
    For 2006, we decided to allocate $17 million among our
    managing directors as a performance cash bonus because:
    (i) we had not previously paid performance-based bonuses to
    our managing directors and desired to begin implementing our
    pay for performance philosophy; (ii) we were
    able to sustain our underlying operations and our core business
    continued to perform, despite the issues we continue to face
    with respect to our financial accounting systems and efforts to
    become timely in our SEC periodic reports; and (iii) we
    were unable to provide for bonuses under the MD Compensation
    Plan. Bonuses were not paid under the MD Compensation Plan
    because the plan has not yet been fully activated and the target
    levels of profitability set forth under the plan were not
    achieved due to our ongoing issues related to our financial
    accounting systems and internal controls and their related
    impact on our ability to become timely in our SEC periodic
    reports and deliver shares of common stock under equity-based
    awards. The amount of the bonus was determined by giving
    consideration to, and was partially covered by, the total base
    compensation we budgeted for payment to our managing directors
    for 2006. The total bonus exceeded the actual amount of
    compensation that would have been paid to our managing directors
    for 2006 by $10 million. Management believes the
    $192.5 million increase in 2006 gross profit across
    all industry groups justified payment of these amounts.
    For 2006, while all of our material weaknesses in our internal
    control over financial reporting cited for 2005 remain, we have
    remediated certain aspects of these material weaknesses, and
    improvements in our internal control over financial reporting
    continue. Over the course of 2006, we undertook significant
    remediation efforts, which reduced the total numbers of
    deficiencies and material weaknesses that continue to contribute
    to the material weaknesses in our internal control environment
    by 24% and 33%, respectively. Senior management implemented and
    caused to be sustained 37




---



##### 



significant changes to personnel, including finance and
    accounting personnel in our corporate offices, processes and
    policies and have communicated the importance of our Standards
    of Business Conduct and ethics, and the importance of internal
    control over financial reporting. In addition, senior management
    caused to be implemented policies and processes and other
    mechanisms around the identification of our long-term assignment
    personnel in the United States and the accuracy and completeness
    of the related financial accounts.  
    In 2006, we realized a net loss of $213.4 million, or a
    loss of $1.01 per share, compared to a net loss of
    $721.6 million, or a loss of $3.59 per share, in 2005. The
    decline in net loss in 2006 as compared to 2005 is attributable
    to several factors, including:  
    Our gross profit across all industry groups in 2006 improved
    over our 2005 gross profit by $192.5 million;
    We did not have a goodwill impairment charge in 2006, compared
    to a $166.4 million goodwill impairment charge incurred in
    2005;
    We recorded $38 million in 2006 for an insurance settlement
    in connection with our settlement with HT; and
    Our income tax provision for 2006 was lower than our income tax
    provision for 2005, as the 2005 amount included a
    $55.3 million increase to valuation allowance primarily
    against our U.S. deferred tax assets.    
    Utilization for 2006 was 76.2%, compared with 75.8% in 2005.
    Utilization for the three months ended March 31, 2007 was
    76.6%.
    Free cash flow for 2006 and 2005 was $8.1 million and
    ($153.9) million, respectively. Net cash provided by and
    (used in) operating activities in 2006 and 2005 was
    $58.7 million and ($113.1) million, respectively.
    Purchases of property and equipment in 2006 and 2005 were
    $50.6 million and $40.8 million, respectively. The
    change in free cash flow for 2006 compared to 2005 resulted
    primarily from the following:  
    We lowered our DSOs through enhancements in our cash collections
    efforts. At December 31, 2006, our DSOs stood at
    82 days, representing a decrease of 12 days, or 13%,
    from our DSOs at December 31, 2005. Our continued focus on
    this metric during 2006 improved our free cash flow by
    $136.3 million as compared to 2005;
    We experienced higher operating profitability in our business,
    as evidenced by the sharp decline in operating loss for 2006 as
    compared to 2005; and
    We experienced greater cash outflows in 2006 due to payments
    made for professional services and related expenses accrued
    under the HT Contract during 2005, and in connection with our
    settlement with Peregrine Systems, Inc.  
    In November 2006, we settled litigation with certain holders of
    our Series B Debentures who had alleged that we were in
    default under the applicable indenture as a result of our
    failure to timely provide certain SEC periodic reports to the
    trustee. Although we continue to believe we were not in default
    under the applicable indenture, and a subsequent courts
    decision has provided support for our belief, this dispute
    exemplifies some of the recurring challenges presented to the
    growth of our business by the continuation of our inability to
    timely file our SEC periodic reports. We continue to be
    guardedly optimistic that achieving our goal of becoming current
    in our SEC periodic reports in 38




---



##### 



2007 and beginning to timely file our SEC periodic reports in
    2008 will help alleviate some of the business pressures we have
    recently experienced in this regard.  
    In 2006, we continued to focus on enhancing our global
    operations model. We launched an on-line, centrally managed
    Strategy and Operating Manual that standardizes and centralizes
    our operating processes and procedures, including legal and
    financial compliance procedures. We also created improved
    contracting procedures that will be implemented in the second
    half of 2007, which will provide additional references,
    resources and rigor around the contracting process. We also
    established a Global Account Management Program and governance
    structure that will focus on the identification and management
    of key global accounts and a Global Solutions Council
    represented by all of our industry groups that will focus on
    identifying opportunities for globalized solution suites.
    In 2006, we increased the use of lower cost resources, both
    offshore (China and India) and domestically (Hattiesburg,
    Mississippi). We focused our global delivery centers on
    developing specific skills and capabilities that would enhance
    our delivery capabilities. In 2006, we opened new facilities in
    Bangalore, India to expand our offshore footprint in an
    increasingly competitive market. In 2007, we will continue to
    optimize our global delivery model to improve our cost structure
    for our clients, and we expect to continue to aggressively
    increase the number of engagement hours delivered through our
    global delivery centers.
    In the first half of 2006, we hired a new General Counsel and
    Chief Compliance Officer, each with significant prior regulatory
    and compliance experience. We have strengthened our compliance
    programs by (1) restructuring and centralizing our
    compliance efforts under our Chief Compliance Officer,
    (2) developing and implementing in 2006 firm-wide enhanced
    compliance training with respect to the Foreign Corrupt
    Practices Act (the initial roll-out of which was completed by
    over 95% of our workforce), (3) adopting in 2007 a new
    Standards of Business Conduct based on best industry practices
    (to replace our prior Code of Business Conduct and Ethics) and
    (4) creating in 2007 a Compliance Committee comprised of
    members of our senior management whose focus will be to properly
    organize and allocate the necessary resources to address
    broader, Company-wide compliance efforts.
    During 2006, we spent approximately $28.0 million related
    to the maintenance of our existing North American financial
    reporting systems and the preparation of our transition to new
    North American financial reporting systems. We finalized
    decisions regarding the design of, and obtained licenses for the
    components needed to substantially replace, our North American
    financial reporting systems. For additional information
    regarding the transformation of our North American financial
    reporting systems, see Principal Business Priorities
    for 2007 and Beyond.
    During 2006, we completed the deployment of our Program Control
    function, composed of approximately 200 accounting
    professionals, designed to support the completeness and accuracy
    of engagement accounting details in North America. This function
    is designed to build effective financial controls into the
    lifecycle of a contract by supporting the timely assembly and
    review of revenue recognition, engagement close-out and other
    contract cost elements as part of our daily operations. The
    success of this function will depend on a number of factors,
    including our ability to attract and retain qualified finance
    professionals, the implementation of an effective control
    environment over client contract accounting and the development
    of financial systems, and the acceptance and utilization of
    these systems by our managing directors, to support the function.
    As of December 31, 2006, we had approximately
    17,500 full-time employees, including approximately 15,300
    consulting professionals, which represented a decrease in
    billable headcount of approximately 0.6% from full-time
    employees and consulting professionals at December 31, 2005
    of 17,600 and 15,400, respectively. As of March 31, 2007,
    we had approximately 17,500 full-time employees, including
    approximately 15,200 consulting professionals.
    Our voluntary, annualized attrition rate for 2006 was 25.6%,
    compared to 25.3% for 2005. The highly competitive industry in
    which we operate, and our continuing issues related to our North 39




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##### 



American financial reporting systems and internal controls, have
    made it particularly critical and challenging for us to attract
    and retain experienced personnel. Our voluntary, annualized
    attrition rate for the three months ended March 31, 2007
    was 23.9%, compared to our voluntary annualized attrition rate
    of 24.2% for the three months ended March 31, 2006.  
    In November 2006, we began our partnership with Yale University
    to create the BearingPoint Leadership Program at Yale School of
    Management, an innovative education and training program
    focusing on career and leadership development for our employees.
    Participants are taught a curriculum jointly developed by a
    faculty composed of both Yale professors and BearingPoint
    specialists, including a consulting skills workshop for
    experienced professionals and management skills training for
    newly hired or promoted managers and managing directors. We
    believe that our collaboration with Yale will offer our
    employees and new recruits with a unique learning experience
    that will help improve our ability to recruit and retain
    talented and motivated employees, provide them with the skills
    and training that will enhance the delivery of services to our
    clients and cultivate a shared set of values, skills and culture
    that we hope will come to define a career with us. Furthermore,
    we believe that our relationship with a top-tier university will
    augment our brand and enhance our recruiting opportunities.
    In April 2007, the U.S. Defense Contract Audit Agency
    (DCAA) issued a report on its audit of our financial
    capability, which concluded that our financial condition is
    acceptable for performing government contracts. The DCAA
    examined our financial condition and capability to determine if
    we have adequate financial resources to perform government
    contracts in the current and near-term (up to one year). We
    expect that after the filing of this Annual Report on Form
    10-K, the
    DCAA will begin a new audit of our financial capability, to
    re-assess our financial condition.
    As previously reported, in May 2006, the DCAA issued a report on
    its audit of our control environment and overall accounting
    systems controls, which audit began in 2005. The DCAA report
    concluded that our accounting system was inadequate in
    part, meaning that our system is adequate for government
    contracting. The DCAA report contained four condition
    statements, the most material of which relates to our failure to
    timely file our periodic reports with the SEC. The remaining
    three condition statements have been significantly or completely
    remediated.
    On February 6, 2007, Standard & Poors
    Rating Services (Standard & Poors)
    withdrew our senior unsecured rating of B- and our subordinated
    debt rating of CCC+ and removed us from CreditWatch, in
    accordance with its policy of withdrawing ratings for companies
    that have not been current in their SEC filings for an extended
    period of time. Separately, on October 6, 2006,
    Moodys downgraded our corporate family rating to B2 from
    B1 and the ratings for two of our subordinated convertible bonds
    series to B3 from B2, and placed our ratings on review for
    further downgrade.  Principal
    Business Priorities for 2007 and Beyond
    Enhance Shareholder Value.
  
    Focus on Larger and More Profitable Clients and Projects.
    We must continue to focus our sales efforts on more profitable
    and growing client accounts and projects. Our long-term clients
    continue to predominate our revenue base, and we intend to
    prioritize our efforts around deepening these 40




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##### 



relationships. With respect to smaller projects, we are
    standardizing our approach so as to either increase their
    profitability or avoid adding them to our portfolio. A key
    factor in returning to positive cash flow from operations will
    be our ability to significantly reduce our SG&A expenses
    associated with marginally profitable opportunities.  
    Focus on Strengths and Specialization. We are seeking to
    improve the clarity of our business strategy by requiring our
    industry groups and managed services teams to further refine
    their respective areas of focus in terms of exclusively targeted
    segments, industries and offerings, and to more clearly
    differentiate their products and services.
    Increase Use of Offshore Services. We are continuing to
    increase the use of lower cost resources both offshore (China
    and India) and domestically (Hattiesburg, Mississippi) to
    support engagement work. Our EMEA practice is also exploring
    Central European near-shore capabilities. Our ability to counter
    the increasing success of offshore service providers in gaining
    market share in lower-margin, high volume market offerings will
    continue to depend on our ability to achieve our strategy of
    leveraging our comparatively limited network of global delivery
    centers and lower cost resources, with the goal of sustaining
    profitable growth in more sophisticated, strategic and
    transformational type engagements. While we had some success in
    this area in 2006, in order to continue to be able to combat
    increasing competition, we must continue to show improvements in
    both increasing the volume of our services delivered offshore
    and maintaining our margins on that work.
    Leverage Project Management and Reduce Cost of Delivery.We are leveraging our workforce more effectively by
    improving our managing director-to-staff ratio on projects from
    1:17 as of March 31, 2005 to 1:24 as of December 31,
    2006. We continue to seek to improve this ratio in 2007 and
    beyond. We also are implementing stricter criteria concerning
    the use of subcontractors to reduce our use of subcontractors
    and drive greater utilization of internal resources.
    Utilize Professional Services Staff More Efficiently. We
    are striving to become more efficient in recruiting, training
    and utilizing our professional services staff. Historically, we
    have faced challenges associated with transitioning employees
    from completed projects to new engagements, forecasting demand
    for our services, maintaining an appropriately balanced and
    sized workforce, and managing attrition. Our current staffing
    and, hence, recruiting efforts are managed on an industry group
    basis. We must continue to focus on improving both the processes
    and systems surrounding recruiting individuals with the right
    skill sets and staffing client engagements globally in a more
    efficient manner. We are actively seeking and soon hope to hire
    an experienced human resources executive to reinvigorate and
    redesign our human resources function.
    Manage By Standardized Metrics. Our new Chief Operating
    Officer is implementing a standardized key performance indicator
    scorecard for all industry groups and segments that will
    reinforce consistent management reporting.
    Improve Risk Management Processes. We have now
    implemented engagement risk management processes at both
    business unit and firm-wide levels to better evaluate
    prospective engagement and execution risks. Through these steps
    we intend to implement specific operations procedures to be
    utilized within our industry groups and deal review procedures
    to review significant proposals and contracts. Our legal team is
    completing a review of the terms of our larger, more risky
    engagements, the results of which will be used to conduct
    periodic deal assessments and reviews throughout the course of
    these engagements.
    Reduce Cost and Improve Quality of Corporate Services. We
    continue to aggressively explore cost reduction opportunities to
    move non-core administrative activities offshore. In 2007, we
    also plan to reduce our infrastructure costs by
    (1) eliminating costs associated with previous revenue
    recognition processes with the full deployment of our Program
    Control Function, (2) reducing employee attrition, thereby
    reducing related costs relating to hiring and exiting employees,
    (3) reducing our reliance on external consultants, and
    (4) consolidating our information technology hosting
    providers. 41




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##### 



Become Timely in Our Financial and SEC Periodic
    Reporting. Form 10-Q
        
    Shorten the Financial Closing Process. To achieve and
    sustain timely financial and SEC periodic reporting, public
    companies with properly functioning internal controls prepare
    their financial statement accounts and balances (the
    financial closing process) on a monthly cycle within
    fifteen days of months end. Since we first identified a
    significant number of material weaknesses in our internal
    control over financial reporting in 2004, we have conducted only
    a quarterly financial closing process. The financial closing
    process for the first quarter of 2007 is not complete. We will
    be transitioning to a monthly financial closing process when we
    begin the preparation of our financial statement accounts and
    balances for the third quarter of 2007. We are targeting
    achievement of a monthly financial closing process 30 days
    after months end, beginning with the first quarter of
    2008. Our ability to achieve this target on time will depend, in
    part, on (1) becoming timely and maintaining only one open
    monthly cycle at a time, (2) strengthening overall control
    processes to rely more on systems (rather than manual)
    processes, (3) gaining experience with new underlying tools
    and processes, (4) moving to a real-time quarterly review
    process by our auditors, (5) completing organizational
    build-outs in certain areas, (6) retaining an appropriate
    number of qualified Finance personnel, particularly in our
    international locations, and (7) full cooperation from our
    client engagement teams and other corporate services in timely
    providing financial information and updates into our financial
    closing process.
    Improve Disclosure Controls. Under the SECs
    reporting requirements, we must file our quarterly reports
    within forty days of the end of each fiscal quarter and our
    annual reports within sixty days of the end of each fiscal year.
    We are very proud of the significant improvements made by our
    Finance and Legal teams in 2006 in the preparation, review and
    completion of the content of our SEC periodic reports. However,
    our disclosure controls process must be further streamlined and
    coordinated across the Company for us to achieve timely filing
    of our SEC periodic reports, given 42




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##### 



that our monthly financial closing process is targeted to be
    reduced to no less than 30 days by early 2008.  
    Remediate Material Weaknesses.We must remediate the
    material weaknesses in our financial reporting to remove the
    significant amounts of manual, time-consuming steps that
    currently exist in our financial closing process to be able to
    consistently file our SEC periodic reports on a timely basis.
    Resolving these material weaknesses is also crucial to being
    able to obtain timely and accurate standardized metrics with
    which to manage our business, increase cash collections and
    further reduce our DSOs, assuming we can achieve our targets for
    shortening the financial closing process. We were unsuccessful
    in our attempts to remediate all of our material weaknesses by
    the end of 2006 and can give no assurances as to how many
    material weaknesses we will be able to remediate by the end of
    2007. We currently do not anticipate full remediation of all
    material weaknesses until 2008, however, we must make
    significant progress in our remediation during 2007, if we are
    to sustain timely financial and SEC periodic reporting in 2008.  Replace Our North American Financial Reporting Systems.
  Reduce Employee Attrition.
  
    PSU Program. In February 2007, the Compensation
    Committee approved the issuance of up to 25 million PSUs to
    our managing directors and other high-performing senior-level
    employees, including its executive officers. The PSU awards,
    each of which initially represents the right to receive at the
    time of settlement one share of the Companys common stock,
    will vest on December 31, 2009. Generally, for any PSU
    award to vest, two performance-based metrics must be achieved
    for the performance period beginning on February 2, 2007
    and ending on December 31, 2009: (1) the Company must
    first achieve a compounded average annual growth target in
    consolidated business unit contribution, and (2) total
    shareholder return for shares of the Companys common stock
    must be at least equal to the 25th percentile of total
    shareholder return of the Standard & Poors 500
    (S&P 500). For information, see Item 11,
    Executive Compensation Compensation Discussion and
    Analysis. Depending on the Companys total
    shareholder return relative to those companies that comprise the
    S&P 500, the PSU awards will vest on December 31, 2009
    at percentages varying from 0% to 250% of the number of PSU
    awards originally awarded, and will settle on various dates in
    2010 and 2011. We have no plans to make additional equity awards
    on a broad basis to our existing employees through 2009.
    Performance Cash Awards. In February 2007, the
    Compensation Committee also granted performance cash awards
    providing for the payment of up to $50 million to a group
    of our managing directors and other high-performing senior-level
    employees, including executive officers. Generally, 50% of these
    cash retention awards will be earned on December 31, 2007,
    and 50% will be earned 43




---



##### 



on December 31, 2008, subject to the Company achieving the
    same compounded growth rate target in consolidated business unit
    contribution as required under the PSU program for the relevant
    period of time. If, however, the minimum compounded annual
    growth in consolidated business unit contribution has not been
    achieved at the end of each of those years, the awards may still
    be fully earned (up to the full remaining available amount of
    the award) if compounded average annual growth for the
    three-year period ended December 31, 2009 is achieved.
    Amounts earned will be paid by March 31, 2010 or, if the
    determination of amounts earned cannot be made by March 31,
    within 30 days of the date when the determination is made.
    Furthermore, we believe this cash award program provides
    retentive benefits for its participants, particularly when our
    equity based awards are illiquid, while further enhancing a
    pay-for-performance culture within the Company.  
    Enhance Employee Training. To help our employees
    develop the skills they need to be successful with clients and
    advance their careers, we will further implement our training
    programs, including the joint training program with Yale
    University. In 2007, our curriculum includes consulting skills
    workshops for both our new analysts as well as our more
    experienced consultants, a management skills workshop for top
    performing managers focused on our companys vision,
    direction, strategy and culture, and leadership workshops, both
    at the senior manager and new managing directors levels. We
    expect that in 2007, over 1,500 of our employees will
    participate in one of our programs at Yale.  
    In 2007, we will be developing a new High-Performing Senior
    Manager Program focused on identifying and developing
    high-performing employees, which will be supported by a new
    curriculum and new promotion processes. This program will
    represent our investment in enhanced succession planning as well
    as our commitment to developing our next generation of leaders.
    In 2007, we are implementing two initiatives aimed at enhancing
    career development and performance management for our employees.
    The BearingPoint Core Competencies provide career guidance to
    our employees by defining a roadmap for career development and
    progression, setting forth a standardized set of behaviors that
    can be used to assess performance within each career level and
    identify areas for development. These core competencies are
    supplemented by our new Career Model, which sets forth three
    specialized career paths, applicable across our organization,
    for focused development and advancement for our staff. The
    Career Model encourages our employees to actively consider their
    long-term career goals within our organization, and to take
    actions that will help them achieve these goals. We believe that
    having a standardized framework for assessing our employees will
    enhance the structure of our cash and incentive compensation
    programs.  
    Improve Employee Culture. We are continuing our
    efforts to enhance the attractiveness of career opportunities at
    BearingPoint. We intend to improve our corporate culture by,
    among other things, (1) implementing an integrated career
    and compensation framework, (2) initiating periodic
    employee satisfaction surveys, (3) utilizing employee
    satisfaction and attrition metrics by our industry groups,
    segments, client teams and individual managing directors,
    (4) increasing the time spent by management with our
    employees, and (5) enhancing our internal human resources
    functions.  Increase Client Awareness, Confidence and
    Satisfaction.
  
    Invest in Our Brand. In late 2006, we launched a new
    brand strategy and began a more aggressive marketing effort in
    late 2006. These programs are designed to increase awareness of
    BearingPoint as a leading global management and technology firm
    among clients and prospects in key markets. Developed through
    extensive internal and external research, our new brand strategy
    and messaging more clearly define who we are, what we do and how
    we are different from our competitors. We launched our new brand
    in February 2007 to our employees, to help improve
    communication, 44




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##### 



increase employee morale and retention, and equip employees with
    enhanced sales and marketing materials to be more successful in
    the marketplace.  
    Redirect Our Marketing Efforts. In connection with
    our new brand strategy, we initiated a fully integrated
    marketing program featuring our re-designed internet site, print
    and online advertising, events, sponsorships, thought
    leadership, public relations and client references. In the
    summer of 2007, we plan to launch a targeted marketing campaign
    to make an impact in the public services market, particularly in
    the Washington, D.C. area. This focused campaign will
    include strategic advertising in key business publications and
    targeted vertical publications in the government sector. We
    expect our brand re-positioning efforts will continue throughout
    2007 and beyond.
    Develop Common Operating Model and Methodologies. We
    are implementing a common operating model across our geographic
    regions to provide clients with integrated global solutions. We
    are evaluating the effectiveness and acceptance within our
    businesses of our common service delivery methodologies. We
    expect to develop, enhance and standardize common methodologies
    and to enforce more rigorously their consistent use across the
    organization. From these efforts, we expect to realize increased
    efficiencies and improved client service quality.
    Client Satisfaction Surveys. Our Client Satisfaction
    Program has served as a valuable tool for gaining insight into
    our client relationships. The program helps us to understand how
    we are perceived in the market and identify differentiators that
    distinguish us from our competitors. In 2006, we redesigned our
    client satisfaction survey, translated the survey into nine
    languages, and expanded the program to increase the number of
    participating clients and translated to every business unit. In
    addition, we added a measure to gauge satisfaction at the
    engagement level, to augment the account-level reviews that were
    already in place. In 2007, we intend to continue to expand the
    scope and scale of the program, to gain a further understanding
    of our clients expectations and levels of satisfaction
    within all of our industry sectors.  Strengthen Our Balance Sheet.
  
    New Credit Facility. Our 2007 Credit Facility,
    consists of (1) term loans in the aggregate principal
    amount of $300 million and (2) a letter of credit
    facility in an aggregate face amount at any time outstanding not
    to exceed $200 million. The 2007 Credit Facility provides
    us with significantly greater financial resources than our 2005
    Credit Facility did, and on terms that will allow us to focus on
    achieving and sustaining timely completion of our financial
    statements and filing of our SEC periodic filing without
    artificially imposed, interim financial reporting deadlines such
    as those that were imposed under the 2005 Credit Facility. For
    additional information regarding the 2007 Credit Facility, see
    Liquidity and Capital Resources.
    Reduce our DSOs and Improve Operating Cash
    Flow. While we made significant strides in reducing
    DSOs in 2006, we have not yet achieved industry averages. To
    achieve further meaningful reductions in DSOs, we have focused
    on this metric at all leadership levels and are working to
    increase the functionality of, and training on, North American
    financial reporting systems to aid in the prompt generation of
    client invoices and account aging schedules. At
    December 31, 2006, our DSOs stood at 82 days, which we
    believe to be significantly above the current DSO average for
    information technology service companies.
    Improve Internal Cash Management. Through
    May 31, 2007, we have repatriated approximately
    $83.6 million from our international subsidiaries in 2007.
    In connection with this effort, we undertook a detailed review
    of our existing internal processes relating to cash management
    and have identified a series of steps that we can take to more
    efficiently utilize cash within our different geographic regions
    and more efficiently allocate firm-wide costs among all of our
    geographic regions. 45




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##### 



Segments
      Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  Revenue.
  2006


2005


$ Change


% ChangeRevenuePublic Services

$
1,339,358


$
1,293,390


$
45,968



3.6
%Commercial Services


554,806



663,797



(108,991
)


(16.4
%)Financial Services


399,331



379,592



19,739



5.2
%EMEA


703,083



662,020



41,063



6.2
%Asia Pacific


360,001



312,190



47,811



15.3
%Latin America


82,319



75,664



6,655



8.8
%Corporate/Other


5,105



2,247



2,858



n/mTotal

$
3,444,003


$
3,388,900


$
55,103



1.6
%   Impact of


Revenue growthcurrency


(decline), net offluctuations


currency impact


TotalRevenuePublic Services


0.0
%


3.6
%


3.6
%Commercial Services


0.0
%


(16.4
)%


(16.4
%)Financial Services


0.0
%


5.2
%


5.2
%EMEA


0.9
%


5.3
%


6.2
%Asia Pacific


(3.2
)%


18.5
%


15.3
%Latin America


9.3
%


(0.5
)%


8.8
%Corporate/Other


n/m



n/m



n/mTotal


0.1
%


1.5
%


1.6
%  46




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##### 



n/m = not meaningful
  
    Public Servicesrevenue increased in 2006, with strong
    revenue growth in certain sectors, particularly in the SLED and
    Emerging Markets sectors. SLED revenue increased due to
    significant increases in revenue from a number of our key
    clients. Emerging Markets revenue increased primarily from
    revenue increases on several large existing multi-year contracts
    and also from revenue associated with several new contracts
    signed in 2006. Revenue declined in our Civilian business sector
    due to reduced information technology spending and an
    increasingly competitive environment.
    Commercial Servicesrevenue decreased in 2006, primarily
    due to a $57.5 million year-over-year decrease in revenue
    associated with the HT Contract and a reduction of
    $20.0 million in revenue related to the resolution of a
    billings dispute with another large telecommunications client
    regarding an engagement completed in 2003. Reduced customer
    demand for our services, particularly in the telecommunications
    industry, also affected our revenue. These decreases were
    partially offset by the recognition in 2006 of approximately
    $22.3 million in previously deferred revenue.
    Financial Servicesrevenue increased in 2006, primarily
    due to revenue growth in our Insurance and Banking sectors,
    offset by declines in our Global Markets sector. Insurance
    sector revenue increased in response to industry-wide demand for
    major technology updates and upgrades to operational systems.
    Banking sector revenue increases were attributable to existing
    client engagements and the introduction of some new clients into
    our traditional client base. Global Markets sector revenue
    declined as we increased the proportion of work derived from
    lower rate per hour offshore resources in response to client
    demand, which affected our revenue.
    EMEArevenue increased in 2006, primarily due to strong
    revenue growth in the United Kingdom, France, Ireland and
    Switzerland. Revenue growth in the United Kingdom was driven by
    our continued expansion in that region, while France continued
    to benefit from an expanding systems integration practice and
    additional penetration into the French public sector market in
    2006. Ireland and Switzerland revenue growth were generally
    attributable to increased demand for consulting services in
    local markets. Revenue in Germany declined due to a combination
    of the impact of adjustments in billable headcount precipitated
    by the restructuring of our German practice, increased pressure
    on pricing, and a reduction in the spending levels of German
    public sector clients.
    Asia Pacificrevenue increased in 2006, primarily due to
    significant revenue growth in Australia and Japan. Australian
    revenue increased primarily due to a significant new client
    engagement in the telecommunications industry. Japanese revenue
    increased due to revenue growth from system implementation
    contracts and projects involving compliance with Japans
    Financial Instruments and Exchange Law, though a substantial
    portion of this revenue growth was derived from the use of
    subcontractors. Asia Pacific revenue was negatively affected in
    2006 by the weakening of foreign currencies against the
    U.S. dollar, primarily the Japanese Yen.
    Latin Americarevenue increased in 2006, primarily as a
    function of the weakening of the U.S. dollar against local
    currencies in Latin America (particularly the Brazilian Real),
    along with local currency revenue growth and increasing
    engagement hours in Brazil, offset by deteriorating revenue in
    Mexico. Revenue in Brazil increased due to the addition of
    significant client engagements, while revenue in Mexico declined
    as they continue to restructure the business to position itself
    for future growth.
    Corporate/Other: Our Corporate/Other segment does
    not contribute significantly to our revenue.  Gross Profit.
 47




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##### 




    Professional compensation expense decreased as a percentage of
    revenue to 49.8% for 2006, compared to 52.2% for 2005. We
    experienced a net decrease in professional compensation expense
    of $53.8 million, or 3.0%, to $1,716.6 million for
    2006 from $1,770.4 million for 2005. The decrease in 2006
    from 2005 was primarily due to higher professional compensation
    expense recorded in 2005 (as compared to 2006) related to
    the loss accrual for the HT Contract. Stock compensation expense
    for 2006 was $41.0 million, as compared to
    $76.3 million for 2005. Cash bonuses earned in 2006 by our
    highest-performing employees were $49.0 million, as
    compared to $17.8 million earned in 2005.
    Other direct contract expenses decreased as a percentage of
    revenue to 26.0% for 2006 compared to 28.7% for 2005. We
    experienced a net decrease in other direct contract expenses of
    $75.8 million, or 7.8%, to $897.0 million for 2006
    from $972.8 million for 2005. The decrease in 2006 from
    2005 was primarily due to other direct contract expenses
    recorded in 2005 related to the loss accrual for the HT
    Contract. In addition, the decline was driven by reduced
    subcontractor expenses as a result of the increased use of
    internal resources and a decrease of resales of procured
    materials.
    Other costs of service as a percentage of revenue decreased to
    7.3% for 2006 from 7.6% for 2005. We experienced a net decrease
    in other costs of service of $7.9 million, or 3.1%, to
    $250.2 million for 2006 from $258.1 million for 2005.
    The decrease in 2006 from 2005 was primarily attributable to a
    reduction in administrative support and related costs for our
    business units.
    In 2006 we recorded, within the Corporate/Other operating
    segment, a charge of $29.6 million for lease and facilities
    restructuring costs, compared to a $29.6 million charge for
    lease, facilities and other exit activities in 2005. These costs
    for 2006 related primarily to the fair value of future lease
    obligations associated with office space, primarily within the
    EMEA and North America regions, which we will no longer be using.  Gross Profit by Segment.
  Year Ended December 31,2006


2005


$ Change


% ChangeGross ProfitPublic Services

$
263,841


$
238,904


$
24,937



10.4
%Commercial Services


81,419



(11,142
)


92,561



830.7
%Financial Services


135,187



110,602



24,585



22.2
%EMEA


129,523



87,702



41,821



47.7
%Asia Pacific


80,448



53,636



26,812



50.0
%Latin America


9,058



4,321



4,737



109.6
%Corporate/Other


(148,950
)


(126,031
)


(22,919
)


n/mTotal

$
550,526


$
357,992


$
192,534



53.8
%  48




---



##### 



Year Ended December 31,2006


2005Gross Profit as a % of
    revenuePublic Services


19.7
%


18.5
%Commercial Services


14.7
%


(1.7
%)Financial Services


33.9
%


29.1
%EMEA


18.4
%


13.2
%Asia Pacific


22.3
%


17.2
%Latin America


11.0
%


5.7
%Corporate/Other


n/m



n/mTotal


16.0
%


10.6
%    n/m = not meaningful
    
    Public Servicesgross profit increased in 2006 despite a
    substantial reduction in gross profits in our SLED practice and
    increases in professional compensation expense related to hiring
    needs related to demand for our services.
    Commercial Servicesgross profit increased in 2006,
    despite significantly lower revenue, primarily due to a
    $45.5 million year-over-year reduction in losses from the
    HT Contract. Other factors contributing to the increase in gross
    profit were the cost savings realized from 2005 workforce
    realignments and reduced subcontractor expenses as a result of
    the increased use of internal resources.
    Financial Servicesgross profit increased in 2006, due to
    higher revenue combined with a decline in compensation expenses.
    The decrease in compensation expenses is primarily due to more
    efficient utilization of Company shared staff in this segment
    and efficient use of offshore resources.
    EMEAgross profit increased in 2006, due primarily to
    higher revenue and improved profitability in France and Ireland
    along with significantly improved profitability in Spain as a
    result of higher utilization and lower costs. Slight declines in
    compensation expense and other direct contract expenses also
    contributed to the increase in gross profit, though compensation
    expense for 2006 continued to be affected by severance and other
    costs related to the internal restructuring of the
    Companys German practice.
    Asia Pacificgross profit increased in 2006, primarily
    due to significant improvements in profitability and staff
    utilization in the Companys Australian and Chinese
    businesses. Due to the high demand for resources in the Japanese
    market and limited availability of qualified personnel,
    increases in subcontractor expenses served to depress the growth
    of gross profit in the Companys Japanese operations.
    Significant regional improvements in compensation expense
    derived from the 2005 workforce reductions in Japan and China
    were substantially offset by additional compensation expenses
    associated with the use of the Companys personnel from
    outside the region in connection with a significant new
    telecommunications industry engagement in Australia.
    Latin Americagross profit increased in 2006, due to
    higher revenue offset by an increase in compensation expenses,
    driven by higher billable headcount to meet the growth of our
    business in the region, predominantly Brazil.
    Corporate/Otherconsists primarily of rent expense and
    other facilities related charges. 49




---



##### 



Amortization of Purchased Intangible
    Assets.
  Goodwill Impairment Charges.
  Selling, General and Administrative
    Expenses.
  Interest Income.
  Interest Expense.
  Insurance Settlement.
  Other Income/Expense, net.
  Income Tax Expense.
  Net Loss.
 50




---



##### 



Year
    Ended December 31, 2005 Compared to Year Ended
    December 31, 2004
  Revenue.
  Year Ended December 31,2005


2004


$ Change


% ChangeRevenuePublic Services

$
1,293,390


$
1,343,670


$
(50,280
)


(3.7
%)Commercial Services


663,797



654,022



9,775



1.5
%Financial Services


379,592



326,452



53,140



16.3
%EMEA


662,020



642,686



19,334



3.0
%Asia Pacific


312,190



328,338



(16,148
)


(4.9
%)Latin America


75,664



79,302



(3,638
)


(4.6
%)Corporate/Other


2,247



1,312



935



n/mTotal

$
3,388,900


$
3,375,782


$
13,118



0.4
%   RevenuegrowthImpact of


(decline), netcurrency


of currencyfluctuations


impact


TotalRevenuePublic Services


0.0
%


(3.7
)%


(3.7
%)Commercial Services


0.0
%


1.5
%


1.5
%Financial Services


0.0
%


16.3
%


16.3
%EMEA


0.1
%


2.9
%


3.0
%Asia Pacific


1.1
%


(6.0
)%


(4.9
%)Latin America


12.9
%


(17.5
)%


(4.6
%)Corporate/Other


n/m



n/m



n/mTotal


0.4
%


0.0
%


0.4
%    n/m = not meaningful
  
    Public Servicesrevenue decreased in 2005, primarily
    attributable to expected reductions of $33.8 million in
    revenue derived from our subcontractors and resales of procured
    materials (which we must bill our clients, thereby increasing
    our revenue) and revenue reductions of $10.0 million
    associated with two loss contracts, both of which more than
    offset increases in headcount and chargeable hours resulting
    from our expanding use of employees at lower average bill rates.
    Commercial Servicesrevenue increased in 2005, primarily
    driven by revenue growth with transportation clients and a
    significant contract with Hawaiian Telcom Communications, Inc.,
    which was partially offset by revenue declines from certain of
    our clients in the manufacturing and high-tech industries. 51




---



##### 




    Financial Servicesrevenue increased in 2005, primarily
    due to revenue growth in all sectors, with especially strong
    growth in the Insurance and Global Market sectors. Revenue
    growth was principally due to an increase in demand for our
    services. Our average billing rates improved slightly
    year-over-year, as our ability to obtain higher rates per hour
    on certain of our market offerings offset the increasing use of
    lower-priced offshore personnel as a component of our overall
    pricing model.
    EMEArevenue increased in 2005, primarily due to combined
    revenue growth in France and the United Kingdom of
    $53.6 million, partially offset by a $29.8 million
    revenue decline in Germany. Our business in France experienced a
    significant shift into systems integration work, while revenue
    growth in the United Kingdom was driven by our continued
    expansion in that region. Revenue for Germany declined as a
    result of decreasing utilization caused by continued
    deterioration of market conditions in Germany which,
    consequently, led us to lower billable headcount.
    Asia Pacificrevenue decreased in 2005, driven primarily
    by decreasing demand for services in Japan and China and the
    planned elimination of subcontractor usage in the region, which
    more than offset the improved billing rates achieved across the
    region in 2005 due to significantly lower revenue write-offs
    during the year. Limited opportunities in Japan and China led to
    significant staff reductions and lower utilization rates in
    those countries.
    Latin Americarevenue decreased in 2005, primarily as
    modest revenue growth in Brazil offset significant declines in
    revenue in all other countries in which we operate in the
    region. Revenue was also negative impacted by the weakening of
    the U.S. dollar against local currencies in Latin America
    (particularly the Brazilian Real).
    Corporate/Other: Our Corporate/Other segment does
    not contribute significantly to our revenue.  Gross Profit.
  
    Professional compensation expense increased as a percentage of
    revenue to 52.2% for 2005, compared to 45.4% for 2004. We
    experienced a net increase in professional compensation expense
    of $238.0 million, or 15.5%, to $1,770.4 million for
    2005 from $1,532.4 million for 2004. The increase in
    professional compensation expense was primarily the result of
    hiring additional billable employees in response to increased
    demand for our services. In addition, $74.9 million of this
    amount was related to the vesting of Retention RSUs.
    Other direct contract expenses decreased as a percentage of
    revenue to 28.7% for 2005 compared to 29.4% for 2004. We
    experienced a net decrease in other direct contract expenses of
    $18.7 million, or 1.9%, to $972.8 million for 2005
    from $991.5 million for 2004. The change was driven
    primarily by reduced subcontractor expenses as a result of the
    increased use of internal resources.
    Other costs of service as a percentage of revenue decreased to
    7.6% for 2005 from 8.7% for 2004. We experienced a net decrease
    in other costs of service of $34.5 million, or 11.8%, to
    $258.1 million for 2005 from $292.6 million for 2004.
    The decrease in 2005 from 2004 was primarily due to the
    settlement costs of $36.9 million involving or related to
    certain legal actions involving Peregrine Systems, Inc. (see
    Item 3, Legal Proceedings,) included in our
    2004 results.
    In 2005 we recorded, within the Corporate/Other operating
    segment, a charge of $29.6 million for lease and facilities
    restructuring costs, compared to an $11.7 million charge
    for lease, facilities and other exist activities in 2004. These
    costs for 2005 related primarily to the fair value of future
    lease obligations associated with our previously announced
    reduction in office space, primarily within the North America,
    EMEA and Asia Pacific regions, which we no longer use. 52




---



##### 



Gross Profit by Segment.
  Year Ended December 31,2005


2004


$ Change


% ChangeGross ProfitPublic Services

$
238,904


$
290,582


$
(51,678
)


(17.8
%)Commercial Services


(11,142
)


129,784



(140,926
)


(108.6
%)Financial Services


110,602



101,075



9,527



9.4
%EMEA


87,702



96,236



(8,534
)


(8.9
%)Asia Pacific


53,636



31,063



22,573



72.7
%Latin America


4,321



13,454



(9,133
)


(67.9
%)Corporate/Other


(126,031
)


(114,670
)


(11,361
)


n/mTotal

$
357,992


$
547,524


$
(189,532
)


(34.6
%)   Year Ended December 31,2005


2004Gross Profit as a % of
    revenuePublic Services


18.5
%


21.6
%Commercial Services


(1.7
%)


19.8
%Financial Services


29.1
%


31.0
%EMEA


13.2
%


15.0
%Asia Pacific


17.2
%


9.5
%Latin America


5.7
%


17.0
%Corporate/Other


n/m



n/mTotal


10.6
%


16.2
%    n/m = not meaningful
    
    Public Servicesgross profit decreased in 2005, in large
    measure due to a $97.9 million increase in compensation
    expense (including non-cash compensation expense of
    $25.5 million relating to the vesting of Retention RSUs)
    and the $50.3 million reduction in gross revenue, which on
    a combined basis, more than offset significant reductions of
    $65.7 million in other direct contract expenses and
    $30.8 million in other costs of services.
    Commercial Servicesgross profit decreased in 2005, as
    significantly higher gross revenue was eroded by significant
    cost overruns and loss accruals, most notably
    $111.7 million on the previously described HT Contract,
    which included increases in subcontractor expense accruals and
    hardware and software purchases that collectively increased our
    other direct contract expenses by $66.6 million which are
    substantially not recoverable. Significant increases in
    compensation expense, including non-cash compensation expense
    relating to the vesting of Retention RSUs, also contributed to
    the decrease in gross profit.
    Financial Servicesgross profit increased in 2005, as
    higher revenue across all sectors more than offset significant
    incremental increases in compensation expense related to a
    substantial increase in headcount, non-cash compensation expense
    relating to the vesting of Retention RSUs ($7.5 million)
    and additional cash bonuses ($3.0 million). 53




---



##### 




    EMEAgross profit decreased in 2005, as incremental
    increases in compensation expense due to severance costs
    associated with workforce realignments in Germany, France and
    Spain ($27.0 million) and non-cash compensation expense
    related to the vesting of the Retention RSUs
    ($13.8 million) more than offset increases in revenue.
    Asia Pacificgross profit increased substantially in
    2005, despite a decrease in revenue due, in large measure, to
    significant demonstrated improvements in cost management and
    realization of contract revenue.
    Latin Americagross profit decreased in 2005, as
    increases in other direct contract expenses and compensation
    expense attributable to fringe benefits, non-cash compensation
    expense related to Retention RSUs and workforce realignments
    offset modest revenue growth in the region.
    Corporate/Otherconsists primarily of rent expense and
    other facilities related charges, which increased in 2005
    primarily due to the lease and facilities restructuring charges
    discussed above.  Amortization of Purchased Intangible
    Assets.
  Goodwill Impairment Charges.
  Selling, General and Administrative
    Expenses.
  Interest Income.
  Interest Expense.
  Loss on Early Extinguishment of Debt.
  Other Expense, net.
  Income Tax Expense.
 54




---



##### 



Net Loss.
  Obligations
    and Commitments
    Payment due by PeriodLess than








AfterContractual Obligations

Total


1 year


1-3 years


3-5 years


5 yearsLong-term debt (1)

$
1,101,004


$
27,110


$
51,325


$
72,732


$
949,837Operating leases


349,745



75,472



133,406



75,829



65,038Unconditional purchase obligations
    (2)


99,594



51,278



36,126



9,190



3,000Obligations under the pension and
    postretirement medical plans


47,558



3,808



7,869



8,433



27,448Microsoft Collaboration Agreement
    (3)


4,689



4,689











Total

$
1,602,590


$
162,357


$
228,726


$
166,184


$
1,045,323     (1)
    
    Long-term debt includes both
    principal and interest scheduled payment obligations. Certain of
    our long-term debt allows the holders the right to convert the
    debentures into shares of our common stock or cash (at the
    Companys option) in earlier periods than presented above.
    For additional information, see Note 6, Notes
    Payable, of the Notes to Consolidated Financial Statements.(2)
    
    Unconditional purchase obligations
    include material agreements to purchase goods or services,
    principally software and telecommunications services, that are
    enforceable and legally binding and that specify all significant
    terms, including: fixed or minimum quantities to be purchased;
    fixed, minimum or variable price provisions; and the approximate
    timing of the transaction. Unconditional purchase obligations
    exclude agreements that are cancelable without penalty.(3)
    
    For additional information, see
    Note 10, Collaboration Agreement, of the Notes
    to Consolidated Financial Statements. 55




---



##### 



Liquidity
    and Capital Resources
    Year Ended December 31,2006 to 20052006


2005


2004


ChangeNet cash provided by (used in):Operating activities

$
58,680


$
(113,071
)

$
48,265


$
171,751Investing activities


67,570



(141,043
)


(109,387
)


208,613Financing activities


(7,316
)


274,152



176,538



(281,468
)Effect of exchange rate changes on
    cash and cash equivalents


15,297



(9,508
)


6,919



24,805Net increase in cash and cash
    equivalents

$
134,231


$
10,530


$
122,335


$
123,701   Operating Activities.
    Investing Activities.
    Financing Activities.
   56




---



##### 



Additional
    Cash Flow Information
  2007
    Outlook.
    and/or
 57




---



##### 



Debt
    Obligations
    Balance











BalanceDecember 31,











December 31,2005


Borrowings


Repayments


Other (b)


2006Convertible debentures

$
668,054


$



$



$
3,436


$
671,490Yen-denominated term loan
    (January 31, 2003)


2,803







(2,802
)


(1
)


Yen-denominated term loan
    (June 30, 2003)


1,402







(1,442
)


40



Other


2,501







(2,262
)


121



360Total notes payable

$
674,760


$



$
(6,506
)

$
3,596


$
671,850    Balance





Discounts on








BalanceDecember 31,





Senior








December 31,2004


Borrowings


Debentures (a)


Repayments


Other (b)


2005Convertible debentures

$
400,000


$
290,000


$
(23,361
)

$



$
1,415


$
668,054Yen-denominated term loan
    (January 31, 2003)


9,724











(6,089
)


(832
)


2,803Yen-denominated term loan
    (June 30, 2003)


4,863











(2,891
)


(570
)


1,402Yen-denominated line of credit(c)


7,795











(6,796
)


(999
)


Other


844



2,874







(1,209
)


(8
)


2,501Total notes payable

$
423,226


$
292,874


$
(23,361
)

$
(16,985
)

$
(994
)

$
674,760     (a)
    
    Amount represents a discount to the
    $40,000 principal amount of the July 2005 Senior Debentures.(b)
    
    Other changes in notes payable
    consist of amortization of notes payable discount and foreign
    currency translation adjustments.(c)
    
    Yen-denominated line of credit was
    terminated on December 16, 2005.      Debt
    Ratings
   58




---



##### 



2007
    Credit Facility
          
    The affirmative covenantsinclude, among other things:
    the delivery of unaudited quarterly and audited annual financial
    statements, all in accordance with generally accepted accounting
    principles; certain monthly operating metrics and budgets;
    compliance with applicable laws and regulations (excluding,
    prior to October 31, 2008, compliance with certain filing
    requirements under the securities laws); maintenance of
    existence and insurance; after October 31, 2008, as
    requested by the Administrative Agent, maintenance of credit
    ratings; and maintenance of books and records (subject to the
    material weaknesses previously disclosed in our 2005
    Form 10-K).
    The negative covenants, which (subject to exceptions)
    restrict certain of our corporate activities, include, among
    other things, limitations on: disposition of assets; mergers and
    acquisitions; payment of dividends; stock repurchases and
    redemptions; incurrence of additional indebtedness; making of
    loans and investments; creation of liens; prepayment of other
    indebtedness; and engaging in certain transactions with
    affiliates.   59




---



##### 



Discontinued
    2005 Credit Facility
        Guarantees
    and Indemnification Obligations
     60




---



##### 



Critical
    Accounting Policies and Estimates
    
    revenue recognition,
    valuation of accounts receivable,
    valuation of goodwill,
    accounting for income taxes,
    valuation of long-lived assets,
    accounting for leases,
    restructuring charges,
    legal contingencies,
    retirement benefits,
    accounting for stock-based compensation, and
    accounting for intercompany loans.    Revenue
    Recognition
  time-and-materials,
  81-1, (SOP 81-1).
 61




---



##### 



time-and-materials
  00-21, SOP 81-1, and/or
      Valuation
    of Accounts Receivable
   62




---



##### 



Valuation
    of Goodwill
        Accounting
    for Income Taxes
   63




---



##### 



Valuation
    of Long-Lived Assets
    Accounting
    for Leases
   64




---



##### 



Restructuring
    Charges
  and/or
  Legal
    Contingencies
    Retirement
    Benefits
   65




---



##### 



Accounting
    for Stock-Based Compensation
           66




---



##### 



UnrecognizedCompensation


Weighted-AverageCosts


Life in YearsStock options

$
11,052



1.7Restricted stock and stock unit
    awards


41,153



3.1ESPP


4,713



1.0Total

$
56,918



2.6   Accounting
    for Intercompany Loans
    Accounting
    for Employee Global Mobility and Tax Equalization
    Recently
    Issued Accounting Pronouncements
     67




---



##### 



No. EITF 00-19-2, No. EITF 00-19-2). No. EITF 00-19-2 No. EITF 00-19-2 No. EITF 00-19-2 No. EITF 00-19-2. No. EITF 00-19-2, EITF 00-19-2
     ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest
    Rate Risk
   68




---



##### 



Expected Maturity DateYear ended December 31,(In thousands of U.S. Dollars, except interest rates)2007


2008

2009

2010


2011

Thereafter


Total


Fair ValueU.S. Dollar Functional CurrencySeries A Convertible
    Subordinated Debentures


















$
250,000


$
250,000


$
247,825Average fixed interest rate



















3.10
%


3.10
%U.S. Dollar Functional CurrencySeries B Convertible
    Subordinated Debentures


















$
200,000


$
200,000


$
206,260Average fixed interest rate



















4.10
%


4.10
%U.S. Dollar Functional CurrencySeries C Convertible
    Subordinated Debentures


















$
200,000


$
200,000


$
273,260Average fixed interest rate



















5.00
%


5.00
%U.S. Dollar Functional CurrencyConvertible Senior Subordinated
    Debentures











$
40,000









$
40,000


$
48,536Average fixed interest rate












0.50
%









0.50
%U.S. Dollar Functional Currency

$
360



















$
360


$
360Average fixed interest rate


5.60
%



















5.60
%   Foreign
    Currency Exchange Risk
    non-U.S. dollars
  ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Page F-1,
  ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE   69




---



##### 



Regulation S-K, Form 10-K
  Regulation S-K Regulation S-K.
  ITEM 9A.
    CONTROLS
    AND PROCEDURES  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
   70




---



##### 



Managements
    Report on Internal Control over Financial
    Reporting
  Rules 13a-15(f) 15d-15(f)
   71




---



##### 



Internal ControlIntegrated
    Framework
    1.
  
    We did not maintain a sufficient complement of personnel in our
    foreign locations with an appropriate level of knowledge,
    experience and training in the application of GAAP and in
    internal control over financial reporting commensurate with our
    financial reporting requirements.
    We did not maintain and communicate sufficient formalized and
    consistent finance and accounting policies and procedures. We
    also did not maintain effective controls designed to prevent or
    detect instances of non-compliance with established policies and
    procedures specifically with respect to the application of
    accounting policies at foreign locations.
    We did not enforce the consistent performance of manual controls
    designed to complement system controls over our North American
    financial accounting system. As a result, transactions and data
    were not completely and accurately recorded, processed and
    reported in the financial statements.
    We did not maintain adequate controls to ensure that employees
    could report actual or perceived violations of our policies and
    procedures. In addition, we did not have sufficient procedures
    to ensure the appropriate notification, investigation,
    resolution and remediation procedures were applied to reported
    violations.    2.
  
    We did not maintain formal, written policies and procedures
    governing the financial close and reporting process.
    We did not maintain effective controls to ensure that management
    oversight and review procedures were properly performed over the
    accounts and disclosures in our financial statements. In
    addition, we did not maintain effective controls to ensure
    adequate management reporting information was available to
    monitor financial statement accounts and disclosures.
    We did not maintain effective controls over the recording of
    recurring and non-recurring journal entries. Specifically,
    effective controls were not designed and in place to provide
    reasonable assurance that journal entries were prepared with
    sufficient supporting documentation and reviewed and approved to
    ensure the completeness and accuracy of the entries recorded.
    We did not maintain effective controls to provide reasonable
    assurance that accounts were complete and accurate and agreed to
    detailed support and that reconciliations of accounts were
    properly performed, reviewed and approved. 72




---



##### 




    We did not maintain effective controls to provide reasonable
    assurance that foreign currency translation amounts resulting
    from intercompany loans were accurately recorded and reported in
    the consolidated financial statements.    3.
  
    We did not design and maintain effective controls to provide
    reasonable assurance over the initiation, recording, processing,
    and reporting of customer contracts, including the existence of
    and adherence to policies and procedures, adequate segregation
    of duties and adequate monitoring by management.
    We did not design and maintain effective controls to provide
    reasonable assurance that contract costs, such as engagement
    subcontractor costs, were completely and accurately accumulated.
    We did not design and maintain effective controls to provide
    reasonable assurance that we adequately evaluated customer
    contracts to identify and provide reasonable assurance regarding
    the proper application of the appropriate method of revenue
    recognition in accordance with GAAP.
    We did not design and maintain effective controls to provide
    reasonable assurance regarding the completeness of information
    recorded in the financial accounting system. Specifically, we
    did not design and have in place effective controls to provide
    reasonable assurance that invoices issued outside of the
    financial accounting system were appropriately recorded in the
    general ledger. As a result, we did not ensure that cash
    received was applied to the correct accounts in the appropriate
    accounting period.  4.
  5.
  6.
 73




---



##### 



7.
  8.
  9.
  
    We did not design and maintain effective controls over the
    accuracy and completeness of the components of our income tax
    provision calculations and related reconciliation of our income
    tax payable and of differences between the tax and financial
    reporting basis of our assets and liabilities with our deferred
    income tax assets and liabilities. We also did not maintain
    effective controls to identify and determine permanent
    differences between our income for tax and financial reporting
    income purposes.
    We did not maintain effective controls, including monitoring,
    over the calculation and recording of foreign income taxes,
    including tax reserves, acquired tax contingencies associated
    with business combinations and the income tax impact of foreign
    debt recapitalization. In addition, we did not maintain
    effective controls over determining the correct foreign
    jurisdictions or tax treatment of certain foreign subsidiaries
    for United States tax purposes.
    We did not design and maintain effective controls over
    withholding taxes associated with interest payable on
    intercompany loans and intercompany trade payables between
    various tax jurisdictions.    Internal ControlIntegrated Framework
 74




---



##### 



Remediation
    of Material Weaknesses in Internal Control over Financial
    Reporting
      
    Senior management made key hires in specific management
    positions.
    Senior management made strategic replacements of certain country
    and regional leadership.
    Senior management and regional and country leaders consistently
    communicated the proper tone as to internal control over
    financial reporting and adherence to the code of business
    conduct and ethics throughout their respective organizations.
    Senior management and regional and country leaders initiated
    specific efforts to design and implement improvements in
    internal controls over financial reporting whose primary
    objective was focused on the completeness and accuracy of
    financial accounts.
    Senior management instituted under the direction of its new
    Chief Compliance Officer comprehensive training on the Foreign
    Corrupt Practices Act, delivered in eight different languages,
    which was monitored to determine completion of the training.
    This resulted in over 95% of all employees world-wide completing
    the training and the required test.      
    A comprehensive LTA policy.
    Training and testing to measure the comprehension of the LTA
    policy including tracking of completion of the training and the
    related test. Completion rates were above 90%.
    A comprehensive tracking system that identifies potential LTA
    personnel and accumulates and records appropriate cost data and
    related liabilities.    
    We established a global remediation project, under the direction
    of the Chief Financial Officer, in order to provide oversight
    and direction in an effort to establish an effective control
    environment.
    We strengthened our Internal Audit function by adding
    individuals with specialized skills where deemed appropriate. 75




---



##### 




    We continued the implementation of our finance transformation
    program, the objective of which was to design and develop
    remediation strategies to address material weaknesses and
    improve internal controls.
    We designed and implemented a global closing process designed to
    identify and define close tasks for both financial and
    non-finance functional areas, due dates for close procedures,
    task completion and ownership, and process integration.
    We implemented a financial close management tool which allows us
    to track progress against approximately 1,500 closing tasks.
    We implemented a Program Control initiative,
    consisting in excess of 250 professionals with requisite skills,
    designed to support the completeness and accuracy of project
    accounting details in North America.
    We implemented improvements to our billing process, established
    policies and procedures limiting any invoicing outside of our
    financial system, and significantly reduced manual billing
    errors and unapplied cash balances.
    In the first quarter of 2007, we deployed a new contract set up
    process and application to guide the comprehensive review of
    contract and project
    set-up data
    within the accounting system.
    In the second quarter of 2007, we deployed and conducted
    extensive training on an application referred to as the
    Project Control Workbench. Combined with other
    process changes, enhanced controls and reporting, this
    application will improve the accuracy and timeliness of
    submission of project accounting data needed for accounting for
    subcontractor accruals,
    estimate-at-complete,
    estimate-to-complete, and revenue recognition in North America.
    We implemented improved processes to identify, monitor, track
    and account for employees working outside their home country for
    extended periods of time including account reconciliations, data
    reviews, and tax cost projection analyses.
    We implemented new processes designed to improve the
    completeness, accuracy and timing of accounting for expatriate
    assignments, including the development of a tracking application
    to assist in the compiling and reporting of
    employee-related
    costs.
    We deployed an automated tool to assist with the process of
    requesting time and expense adjustments.
    We performed in-depth access reviews in certain regions of the
    applicable payroll systems to ensure proper access restrictions.
    We created an oversight function within the Corporate Controller
    group to provide additional analyses, review and oversight for
    fixed assets.
    We implemented procedures to include a regular review of asset
    impairment.
    In the first quarter of 2007, we completed a fixed asset
    inventory in addition to our periodic electronic
    inventory of laptops and desktops, to validate asset existence.
    We centralized all lease administration, enabling us to capture
    all lease obligations and lease terms, and measure the
    completeness and accuracy of our lease records.
    We implemented a review of certain monthly leasing activity
    reports to identify lease-related commitments.
    We implemented a process to identify real-time lease activity or
    other lease term changes with respect to our leased facilities.   76




---



##### 



Changes
    in Internal Control over Financial Reporting
    ITEM 9A(T).
    CONTROLS
    AND PROCEDURES    ITEM 9B.
    OTHER
    INFORMATION   77




---



##### 



PART III.   ITEM 10.
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT    Class I
    Directors Whose Terms Expire in 2007
  Douglas C. Allred
  Betsy J. Bernard
  Spencer C. Fleischer
  Class II
    Directors Whose Terms Expire in 2008
  Wolfgang Kemna
  Albert L. Lord
  J. Terry Strange
 78




---



##### 



Class III
    Directors Whose Terms Expire in 2009
  Roderick C. McGeary
  Jill S. Kanin-Lovers
  Harry L. You
    Presiding
    Director of Executive Sessions of Non-Management
    Directors
    Audit
    Committee
    Compensation
    Committee Interlocks and Insider Participation
   79




---



##### 



Standards
    of Business Conduct
  and/or www.bearingpoint.com,
  Committee
    Charters
  www.bearingpoint.com.
  Annual
    Certifications
    Communications
    with Board of Directors
    c/o General
  1-800-206-4081 240-864-0229
 80




---



##### 



Section 16(a)
    Beneficial Ownership Reporting Compliance
  Form 10-K
  ITEM 11.
    EXECUTIVE
    COMPENSATION  Compensation
    Discussion and Analysis
    Overall
    Compensation Philosophy and Objectives
      
    attract and retain the best possible talent;
    motivate our peoples efforts to achieve long-term positive
    returns for our stockholders;
    increase the use of performance and equity-based awards;
    communicate metrics to influence employee performance and
    accountability;
    provide for cash and long-term incentive compensation at levels
    that are competitive with companies within our industry
    (targeting to remain around the 50th percentile); and
    recognize outstanding individual performance. 81




---



##### 



How
    Compensation is Determined
  Mix of Total Compensation.
    Market Benchmarking.
    Role of Compensation Committee and Management in Executive
    Officer Compensation Decisions.
  Management Team Employment Agreements.
 82




---



##### 



Equity
    Compensation Programs
      PSU Program.
 83




---



##### 



Restricted Stock Units (RSUs).
    Principal
    Components of Executive Officer Compensation
      Fixed
    Compensation
  Base Salaries.
  Determination of 2006 Base Salaries.
   84




---



##### 



Variable
    Compensation
  Annual Incentive Bonus.
  Determination of 2006 Annual Incentive Bonuses. 2006 Long-Term
    Incentive Compensation
    Harry You

    outstanding
    feedback in the 360 degree peer review process    successful
    motivation of the Companys managing directors to drive
    Company performance    progress
    made and left to be achieved with respect to the Companys
    SEC filing status    evaluations
    by Board members 85




---



##### 



Roderick McGeary

    time
    dedicated to Board of the Directors and effectiveness in
    fulfilling Chairman role; liaison role between management and
    the Board    management
    roles and responsibilities, in addition to Board role    executive
    sponsor of the Companys transition to new financial
    reporting systems    executive
    management role in addressing contractual or engagement
    relationship issuesJudy Ethell

    development
    of Finance leadership team    responsibilities
    related to development of financial reporting systems    oversight
    of internal audit, internal controls and Sarbanes-Oxley efforts    progress
    achieved and remaining to be achieved with respect to the filing
    of the Companys SEC periodic reports    expanded
    responsibilities as Chief Financial Officer    evaluations
    by the Audit CommitteeLaurent Lutz

    restructuring
    of the Legal department    stewardship
    of  key external constituenciese.g., SEC, New York Stock
    Exchange, insurers    creation
    and implementation of compliance function    success
    in managing and resolving various disputes and lawsuits    level
    of contribution in Board of Directors and committee meetings    implementation
    and oversight of improved disclosure controlsRich Roberts

    individual
    performance rating among managing directors    leadership
    role within the Public Services business unit   Long-Term
    Incentive Compensation
  2006 Long-Term Incentive Compensation.
   86




---



##### 



2007
    Compensation
  Base Salary.
  Base SalaryName

for 2007Harry L. You

$
780,000Roderick C. McGeary


676,000Judy A. Ethell


520,000Laurent C. Lutz


520,000     PSU Awards.
  Total NumberofName

PSUs Granted (1)Harry L. You


959,079Roderick C. McGeary


255,754Judy A. Ethell


306,905Laurent C. Lutz


383,632  87




---



##### 



(1)
    
    The PSUs will vest on December 31, 2009 if two
    performance-based metrics are achieved for the performance
    period beginning on February 2, 2007 and ending on
    December 31, 2009. The Company must first achieve a
    compounded average annual growth target in consolidated business
    unit contribution. Then, depending on the Companys total
    shareholder return relative to those companies that comprise the
    S&P 500, the percentage of PSU awards that vest will
    vary from 0% to 250%. The Total Number of PSUs
    Granted assumes that 100% of the PSU awards vest.    Other
    Compensation
  Deferred Compensation Plans.
  Other Benefits.
  Perquisites and Other Compensation. gross-up
  Regulatory
    Considerations
    change-in-control
 88




---



##### 



REPORT OF
    THE COMPENSATION COMMITTEE
    OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
  Form 10-K Form 10-K.
    Douglas C. Allred (Chair)
    Betsy Bernard
    Jill S. Kanin-Lovers*
    J. Terry Strange**
  *Member of the Compensation Committee since May 10,
    2007
  **Member of the Compensation Committee during 2006 and
    through June 18, 2007
 89




---



##### 



Summary
    of Cash and Certain Other Compensation
    Summary
    Compensation Table
  Non-EquityIncentiveStock


Option


Plan


All OtherName and




Salary


Bonus


Awards


Awards


Compensation


Compensation


TotalPrincipal Position

Year


($) (1)


($) (1)


($) (2)


($) (2)


($)


($)


($)Harry L. You(3)


2006



750,000



58,500



938,900



2,519,300







331,828



4,598,528Chief Executive
    OfficerRoderick C. McGeary


2006



662,640



50,712



250,000



263,732











1,227,084Chairman of the BoardJudy A. Ethell(4)


2006



500,000



300,000



690,700



1,131,000







3,797



2,625,497Chief Financial
    OfficerLaurent C. Lutz(5)


2006



411,059



1,311,059











525,000



78,431



2,325,549General Counsel and
    SecretaryRichard J. Roberts(6)


2006



650,000



50,700



855,400



332,160







3,977



1,892,237Chief Operating
    Officer     (1)
    
    Unless otherwise noted,
    Bonus amounts consist of performance-based cash
    bonuses accrued in the fiscal year for which the bonus has been
    earned. We have entered into employment agreements with
    Mr. You, Ms. Ethell and Mr. Lutz that set forth
    the terms of their compensation.(2)
    
    Unless otherwise noted, stock
    awards, which consist of RSUs, and stock options were granted in
    accordance with our LTIP. If dividends are declared on our
    common stock while any RSUs are outstanding, the number of
    shares to be granted upon settlement of the RSUs will be
    adjusted to reflect the payment of such dividends. Amounts
    reflected in the table as 2006 compensation reflect the dollar
    amount recognized for financial statement reporting purposes in
    2006 in accordance with SFAS 123(R) for equity award
    expense. For additional information about 2006 awards of RSUs,
    stock options, and other non-equity incentive plan compensation,
    see   Grants of Plan-Based Awards.(3)
    
    Mr. Yous All Other
    Compensation includes reimbursements of $259,568 for costs
    related to the sale of his residences, $17,117 in commuting
    expenses, $51,532 in tax equalization payments with respect to
    the reimbursement of moving expenses and certain state taxes
    paid by Mr. You, $2,361 in personal travel expenses and
    $1,250 in Company matching contributions under our 401(k) Plan.(4)
    
    On October 3, 2006, we entered
    into a letter agreement with Ms. Ethell relating to the
    rescission and replacement of certain grants of nonqualified
    stock options and RSUs made to her in July 2005 in connection
    with her employment with the Company. On July 1, 2005,
    Ms. Ethell received a grant for 292,000 RSUs and a stock
    option grant to purchase 600,000 shares of common stock
    (collectively, the 2005 Awards). The 2005 Awards
    were intended to be of effect only after the Company had become
    current in its SEC periodic filings; however, we reconsidered
    the rationale behind this approach and as a result, we canceled
    the 2005 Awards and made subsequent replacement grants to
    Ms. Ethell, effective as of September 19, 2006 (the
    2006 Awards). The 2006 Awards consist of:
    (a) stock options to purchase up to 600,000 shares of
    our common stock, of which 25% vested upon grant, and, subject
    to achievement of certain performance criteria, 25% will vest on
    July 1 in each of 2007 through 2009, (b) 292,000 RSUs, of
    which 204,400 vested on date of grant, and, subject, to
    achievement of certain performance criteria, an additional
    29,200 will vest on July 1 in each of 2007 through 2009, and
    (c) 94,000 RSUs, of which 25% vested on date of grant, and
    subject to achievement of certain performance criteria, 25% will
    vest on July 1 in each of 2007 through 2009.(5)
    
    Mr. Lutzs annual base
    salary for 2006 was $500,000. The amount reported as
    Mr. Lutzs salary is the amount actually paid in 2006.
    Mr. Lutzs 2006 bonus compensation consists of a
    $900,000 signing bonus and $411,059 of bonus compensation (pro
    rated, based on an annual performance bonus of $500,000).
    Mr. Lutzs 2006 non-equity incentive plan compensation
    is more fully described under   Grants of
    Plan-Based Awards. Mr. Lutzs All Other
    Compensation consists of $41,857 in legal fees paid on
    Mr. Lutzs behalf in connection with the negotiation
    of his employment arrangements with the Company, reimbursement
    of $36,574 in tax equalization payments with respect to the
    reimbursement of legal fees and certain state taxes paid by
    Mr. Lutz.(6)
    
    Effective as of January 8,
    2007, Mr. Roberts no longer serves as our Chief Operating
    Officer in connection with the appointment of F. Edwin Harbach
    as our President and Chief Operating Officer. 90




---



##### 



Grants of
    Plan-Based Awards
    GrantExercise


Date FairPrice of


Value ofEstimated Future Payouts Under


Estimated Future Payouts Under


Option


Stock andGrant


Non-Equity Incentive Plan Awards


Equity Incentive Plan Awards


Awards


OptionName

Date


Threshold ($)


Target ($)


Maximum ($)


Threshold (#)


Target (#)


Maximum (#)


($/Sh)


AwardsHarry You


































Roderick C. McGeary (1)


9/25/2006























29,411






$
249,994Judy A. Ethell (2)


9/19/2006























600,000


$
8.70



2,883,6009/19/2006























292,000







2,540,4009/19/2006























94,000







817,800Laurent C. Lutz (3)


2/27/2006










$
1,750,000
(3)











(3)






Richard J. Roberts (4)


9/25/2006























77,343







657,4169/25/2006























93,177







792,005     (1)
    
    Mr. McGeary was granted 29,411
    RSUs that vest 25% on January 1 in each of 2007 through 2010.(2)
    
    Ms. Ethell was granted the
    following awards: (a) stock options to purchase up to
    600,000 shares of our common stock, of which 25% vested
    upon grant, and, subject to achievement of certain performance
    criteria, 25% will vest on July 1 in each of 2007 through 2009,
    (b) 292,000 RSUs, of which 204,400 vested on date of grant,
    and, subject, to achievement of certain performance criteria, an
    additional 29,200 will vest on July 1 in each of 2007 through
    2009, and (c) 94,000 RSUs, of which 25% vested on date of
    grant, and subject to achievement of certain performance
    criteria, 25% will vest on July 1 in each of 2007 through 2009.
    These grants were made pursuant to a letter agreement between
    the Company and Ms. Ethell, effective as of October 3,
    2006, and replaced grants made to Ms. Ethell in 2005 in
    connection with her employment with the Company. The 2005 Awards
    were intended to be modified to be of effect only after the
    Company had become current on its SEC periodic filings, however,
    the rationale behind this approach was reconsidered by the
    Company. As a result, the 2005 Awards were canceled and the
    Compensation Committee approved these subsequent grants to
    Ms. Ethell, effective as of September 19, 2006.(3)
    
    Mr. Lutz was granted the
    following: on the earlier of (i) the date an effective
    registration statement on
    Form S-8
    is filed or is on file and (ii) the date, if any, we cease
    to be a reporting company under the Exchange Act, a grant of
    RSUs having an aggregate value of $1.75 million; provided,
    however, if RSUs have not yet been granted, subject to certain
    conditions, Mr. Lutz will receive cash payments (which will
    reduce the value of any RSUs to be granted) of $525,000 on
    July 1, 2006, $525,000 on June 30, 2007 and $175,000
    on December 31 in each of 2007 through 2010.(4)
    
    Mr. Roberts was granted the
    following awards: (a) 77,343 RSUs, all of which vested on
    September 25, 2006, and (b) 93,177 RSUs that vest 25%
    on January 1 in each of 2007 through 2010. 91




---



##### 



Outstanding
    Equity Awards at Fiscal Year-End (December 31,
    2006)
    Option Awards


Stock AwardsEquityIncentivePlan Awards:Equity














Equity


MarketIncentive














Incentive


or PayoutPlan Awards:











Market


Plan Awards:


Value ofNumber of


Number of


Number of








Number of


Value of


Number of


UnearnedSecurities


Securities


Securities








Shares or


Shares or


Unearned Shares,


Shares,Underlying


Underlying


Underlying








Units of


Units of


Units or


Units orUnexercised


Unexercised


Unexercised


Option


Option


Stock That


Stock That


Other Rights


Other RightsOptions (#)


Options (#)


Unearned


Exercise


Expiration


Have not


Have not


That Have


That HaveName

Exercisable


Unexercisable


Options (#)


Price ($)


Date


Vested (#)


Vested ($)


not Vested (#)


not Vested (#)Harry L. You


500,000
(1)


1,500,000
(1)





$
7.55



3/18/2015



750,000
(2)

$
5,902,500







Roderick C. McGeary


7,928











55.50



6/30/2010



29,411
(3)


231,465







15,000











16.38



4/24/2011















450,000











9.00



11/19/2014















Judy A. Ethell


150,000
(4)


450,000
(4)






8.70



9/19/2016



87,600
(4)


689,412







70,500
(4)


554,835







Laurent C. Lutz (5)


































Richard J. Roberts


11,892











18.00



7/31/2010



93,177
(6)


733,303







53,205











18.00



2/8/2011















50,000











13.30



7/24/2011















11,611











11.01



9/3/2012















70,000











10.01



9/3/2012















125,000











8.19



8/28/2013















40,000
(7)


20,000
(7)






9.15



10/4/2014















     (1)
    
    Mr. You was granted stock
    options to purchase up to 2,000,000 shares of our common
    stock, which options vest 25% on March 18 in each of 2006
    through 2009.(2)
    
    Mr. You was granted 750,000
    RSUs, of which 62,500 RSUs vested on March 21, 2007,
    125,000 RSUs vest on March 21, 2008, 187,500 RSUs vest on
    March 21 in each of 2009 and 2010, 125,000 RSUs vest on
    March 21, 2011 and 62,500 RSUs vest on March 21, 2012.(3)
    
    Mr. McGeary was granted 29,411
    RSUs that vest 25% on January 1 in each of 2007 through 2010.(4)
    
    Ms. Ethell was granted stock
    options to purchase up to 600,000 shares of our common
    stock, of which 25% vested upon grant (September 19, 2006),
    and, subject to achievement of certain performance criteria, 25%
    will vest on July 1 in each of 2007 through 2009. In addition,
    Ms. Ethell was granted (i) 292,000 RSUs, of which
    204,400 vested on date of grant (September 19, 2006), and,
    subject to achievement of certain performance criteria, an
    additional 29,200 will vest on July 1 in each of 2007 through
    2009; and (ii) 94,000 RSUs, of which 25% vested on date of
    grant (September 19, 2006), and subject to achievement of
    certain performance criteria, 25% will vest on July 1 in each of
    2007 through 2009. These grants were made in connection with the
    rescission and replacement of the 2005 Awards. For additional
    information, see footnote 4 of the Summary
    Compensation Table on page 91.(5)
    
    From April 20, 2005 through
    September 14, 2006, pursuant to Regulation BTR, we
    announced there would be a blackout period under our 401(k)
    plan. Due to existence of the blackout period, we were unable to
    make issuances of equity awards to its executive officers. In
    connection with his employment, Mr. Lutz was granted the
    following: on the earlier of (i) the date an effective
    registration statement on
    Form S-8
    is filed or is on file and (ii) the date, if any, we cease
    to be a reporting company under the Exchange Act, a grant of
    RSUs having an aggregate value of $1.75 million; provided,
    however, if RSUs have not yet been granted, subject to certain
    conditions, Mr. Lutz will receive cash payments (which will
    reduce the value of any RSUs to be granted) of $525,000 on
    July 1, 2006, $525,000 on June 30, 2007 and $175,000
    on December 31 in each of 2007 through 2010.(6)
    
    Mr. Roberts was granted 93,177
    RSUs that vest 25% on January 1 in each of 2007 through 2010.(7)
    
    Mr. Roberts was granted stock
    options to purchase up to 60,000 shares of our common
    stock. The stock options vest as follows: 1/3 on October 4 in
    each of 2005, 2006, and 2007. 92




---



##### 



Option
    Exercises and Stock Vested
    Option Awards


Stock AwardsNumber of Shares





Number of SharesAcquired on


Value Realized on


Acquired on


Value Realized onName

Exercise (#)


Exercise ($)


Vesting (#)


Vesting ($)Harry L. You














Roderick C. McGeary














Judy A. Ethell










227,900


$
1,982,730Laurent C. Lutz














Richard J. Roberts










149,782



1,226,787   Pension
    Benefits
  U.S.-based
  Nonqualified
    Deferred Compensation Plans
    Employment
    Agreements
  Managing Director Agreements.
   93




---



##### 



Employment Agreement for Harry L. You.
  
    Compensation. Information regarding
    Mr. Yous annual base and bonus compensation can be
    found in the Summary Compensation Table above.
    Information regarding equity awards issued to Mr. You
    pursuant to his employment arrangements are included under
    Outstanding Equity Awards at Fiscal Year-End
    (December 31, 2006), above.
    Benefits/Long-Term Incentives. Mr. You is
    entitled to participate in all employee benefit (including
    long-term incentives), fringe and perquisite plans, practices,
    programs, policies and arrangements generally provided to senior
    executives of the Company at a level commensurate with his
    position.
    Relocation. Mr. You was reimbursed for
    reasonable relocation and transitional housing and travel
    expenses, including a tax
    gross-up
    payment to cover all applicable taxes, and the Company provided
    assistance in connection with the sale of his residences.
    Indemnification. We agreed to indemnify Mr. You
    with respect to his activities on behalf of the Company, for any
    failure of the Company to comply with Section 409A of the
    Internal Revenue Code of 1986, as amended, and for certain other
    matters.
    Termination Payments. Mr. You is entitled to
    certain termination payments under his employment agreement,
    which are described below under Potential Payments
    upon Termination or Change of Control.  Employment Agreement for Judy A. Ethell.
  
    Compensation. Information regarding
    Ms. Ethells annual base and bonus compensation can be
    found in the Summary Compensation Table above.
    Information regarding equity awards issued to Ms. Ethell
    pursuant to her employment arrangements are included under
    Outstanding Equity Awards at Fiscal Year-End
    (December 31, 2006), above.
    Benefits/Long-Term Incentives. Ms. Ethell is
    entitled to participate in all employee benefit (including
    long-term incentives), fringe and perquisite plans, practices,
    programs, policies and arrangements generally provided to senior
    executives of the Company at a level commensurate with her
    position.
    Relocation. Ms. Ethell was reimbursed for
    reasonable relocation and transitional housing and travel
    expenses, including a tax
    gross-up
    payment to cover all applicable taxes, and the Company provided
    assistance in connection with the sale of her principal
    residence.
    Indemnification. We agreed to indemnify
    Ms. Ethell with respect to her activities on behalf of the
    Company, for any failure of the Company to comply with
    Section 409A of the Internal Revenue Code of 1986, as
    amended, and for certain other matters.
    Termination Payments. Ms. Ethell is entitled to
    certain termination payments under her employment agreement,
    which are described below under Potential Payments
    upon Termination or Change of Control.  Employment Agreement for Laurent C. Lutz.
  
    Compensation. Information regarding
    Mr. Lutzs annual base and bonus compensation can be
    found in the Summary Compensation Table above.
    Information regarding non-equity incentive plan compensation
    awarded to Mr. Lutz are included under Grants of
    Plan-Based Awards, above.
    Benefits/Long-Term Incentives. Mr. Lutz is
    entitled to participate in all employee benefit (including
    long-term incentives), fringe and perquisite plans, practices,
    programs, policies and arrangements generally provided to senior
    executives of the Company at a level commensurate with his
    position. 94




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##### 




    Legal Fees. Mr. Lutz was reimbursed for
    reasonable legal fees in connection with the negotiation and
    drafting of his employment arrangements.
    Indemnification. We agreed to indemnify
    Mr. Lutz in the event that any activity he undertakes on
    behalf of the Company is challenged as being in violation of any
    agreement he may have with a prior employer and for certain
    other matters. In addition, Mr. Lutz is entitled to receive
    a gross-up for any payment to him under any of his agreements
    that would be subject to a surtax imposed by Section 409A
    of the Internal Revenue Code or for any interest or penalties
    thereon.
    Termination Payments. Mr. Lutz is entitled to
    certain termination payments under his employment agreement,
    which are described below under Potential Payments
    upon Termination or Change of Control.  Potential
    Payments upon Termination or Change of Control
  Severance Payments under Managing Director
    Agreements.
  Severance Payments under Employment
    Agreements.
  Termination Payments under Special Termination
    Agreements.
   95




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##### 



Potential
    Payments
    Upon Termination of Employment or
    Change-in-Control
    as of December 31, 2006
    
    the named executive officers employment were terminated by
    us without Cause (as defined in such named executive
    officers employment agreement) or by the named executive
    officer for Good Reason (as defined in such named
    executive officers employment agreement); and
    the named executive officers employment (a) were
    terminated by us within two years after a Change in Control (as
    defined in such named executive officers Special
    Termination Agreement) for any reason other than
    Cause (as defined in such named executive
    officers Special Termination Agreement) or if the
    executive became permanently disabled or was unable to work for
    a period of 180 consecutive days, (b) (i) were
    involuntarily terminated by us (other than for Cause) or
    (ii) were terminated by the named executive officer
    following a reduction or adverse change in the named executive
    officers duties or compensation, in each case within six
    months prior to a Change in Control and in anticipation of a
    Change in Control or (c) were terminated by the named
    executive officer during the term of the Special Termination
    Agreement but after a Change in Control if one of the events
    specified in such named executive officers Special
    Termination Agreement has occurred.  Termination of


Change inName

Employment (1) (2)


Control (3)Harry L. You

$
3,724,531
(4)

$
29,477,602
(5)Roderick C. McGeary


162,500
(6)


Judy A. Ethell


1,488,731
(7)


11,627,168
(8)Laurent C. Lutz


4,633,709
(9)


12,218,534
(10)Richard J. Roberts


325,000
(11)


4,167,168
(12)     (1)
    
    Amounts set forth in the table for
    Mr. You, Ms. Ethell and Mr. Lutz reflect the
    severance payments payable under their respective employment
    agreements. If Mr. You, Ms. Ethell or
    Mr. Lutzs employment is not terminated (i) by us
    without Cause (as defined in such named executive
    officers employment agreement) or (ii) by the named
    executive officer for Good Reason (as defined in
    such named executive officers employment agreement), then
    such named executive officer may still be eligible to receive
    payments representing earned but unpaid salary and bonuses
    amounts, any unpaid accrued personal days or unreimbursed
    business expenses and any other amounts due under the
    Companys benefit plans. If Mr. You, Ms. Ethell
    or Mr. Lutz does not qualify for payment under any of the
    provisions of their respective employment agreements, they may
    be eligible to receive severance payments under their respective
    Managing Director Agreements if their employment is terminated
    for Cause (as defined in the respective Managing Director
    Agreement) or for no reason. Such payments would generally
    consist of all earned and unpaid base salary plus a payment
    equal to three months pay at such named executive
    officers current base salary. Amounts payable under the
    Managing Director Agreements for Mr. You, Ms. Ethell
    and Mr. Lutz as of December 31, 2006 would have been
    $187,500, $125,000 and $125,000, respectively. Amounts set forth
    in the table for Messrs. McGeary and Roberts reflect the
    severance payments payable under their respective Managing
    Director Agreements.(2)
    
    The values of accelerated stock
    options and RSUs assume a $7.87 per share price for our common
    stock (the closing price on December 29, 2006).(3)
    
    Amounts set forth in the table for
    Mr. You, Ms. Ethell, Mr. Lutz and
    Mr. Roberts reflect the termination payments payable
    governed under their respective Special Termination Agreements
    upon a Change of Control (as defined in such agreements).
    Mr. McGeary is not a party to a Special Termination
    Agreement. Even if Mr. You, Ms. Ethell or
    Mr. Lutz is not eligible to receive the payments set forth
    in the table above upon a change in control (as defined in the
    Special Termination Agreements), all unvested options and
    restricted stock held will immediately vest upon the occurrence
    of a Change of Control (as defined under the LTIP) pursuant to
    such named executive officers employment agreement. In
    addition, the Change of Control provisions under the LTIP
    generally provide that any unvested portion of stock option
    grants and RSUs will vest upon the occurrence of a Change of
    Control (as defined in the LTIP). See Change of Control
    Provisions Under the LTIP below. Furthermore, if such
    named executive 96




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##### 



officer is not eligible to receive
    the payments and other benefits specified in his or her Special
    Termination Agreement upon a change in control, such named
    executive officer may be eligible to receive the payments
    payable upon termination of employment under such
    individuals employment agreement, as specified in this
    table and the related footnotes.  (4)
    
    Under Mr. Yous
    employment agreement, Mr. You would have been entitled to
    the following: (i) payment equal to two times the sum of
    his (A) annual base salary ($750,000) and (B) target
    bonus ($750,000), (ii) payment of accrued and unused
    personal days ($51,469), (iii) payment of premiums under
    the Consolidated Omnibus Budget Reconciliation Act of 1985, as
    amended for a period of 18 months after termination
    ($13,906), and (iv) the vesting of an additional 500,000
    options and 62,500 RSUs that would have vested within the first
    anniversary of the termination date ($651,875).(5)
    
    Under Mr. Yous Special
    Termination Agreement, Mr. You would have been entitled to
    the following: (i) payment equal to 299% of the sum of his
    (A) annual base salary in 2006 ($750,000) and
    (B) bonus payment in 2005 ($1,000,000), (ii) for a
    period of 2 years after his termination, continuation of
    medical, dental, life insurance, disability, accidental death
    and dismemberment benefits and other welfare benefits, subject
    to certain exceptions ($15,307), (iii) if
    Mr. Yous employment is involuntarily terminated by us
    (other than for Cause) or there is a reduction or adverse change
    in Mr. Yous duties or compensation and Mr. You
    terminates his employment within six months prior to a Change of
    Control and in anticipation of a Change of Control, the vesting
    of all unvested options and RSUs (an additional 1,500,000
    options and 750,000 RSUs valued at $6,382,500),
    (iv) reimbursement for outplacement services,
    (v) payment of any earned but unpaid salary, bonus or
    incentive compensation and (vi) an additional tax
    gross-up
    payment of $18,591,991.(6)
    
    Under Mr. McGearys
    Managing Director Agreement, Mr. McGeary would have been
    entitled to payment equal to three months of his base salary
    ($650,000).(7)
    
    Under Ms. Ethells
    employment agreement, Ms. Ethell would have been entitled
    to (i) payment equal to the sum of her (A) annual base
    salary ($500,000) and (B) target bonus ($500,000),
    (ii) payment of accrued and unused personal days ($59,389),
    (iii) payment of premiums under the Consolidated Omnibus
    Budget Reconciliation Act of 1985, as amended for a period of
    18 months after termination ($13,906), and (iv) the
    vesting of an additional 150,000 options and 52,700 RSUs that
    would have vested within the first anniversary of the
    termination date ($290,249).(8)
    
    Under Ms. Ethells
    Special Termination Agreement, Ms. Ethell would have been
    entitled to the following: (i) payment equal to 299% of the
    sum of her (A) annual base salary in 2006 ($500,000) and
    (B) target bonus for 2006 ($500,000), (ii) for a
    period of 2 years after her termination, continuation of
    medical, dental, life insurance, disability, accidental death
    and dismemberment benefits and other welfare benefits, subject
    to certain exceptions ($15,307), (iii) if
    Ms. Ethells employment is involuntarily terminated by
    us (other than for Cause) or there is a reduction or adverse
    change in Ms. Ethells duties or compensation and
    Ms. Ethell terminates her employment within six months
    prior to a Change of Control and in anticipation of a Change of
    Control, the vesting of all unvested options and RSUs (an
    additional 450,000 options and 158,100 RSUs valued at $870,747),
    (iv) reimbursement for outplacement services,
    (v) payment of any earned but unpaid salary, bonus or
    incentive compensation and (vi) an additional tax
    gross-up
    payment of $7,379,986.(9)
    
    Under Mr. Lutzs
    employment agreement, Mr. Lutz would have been entitled to
    (i) payment equal to the sum of his (A) annual base
    salary ($500,000) (or, in the event of termination by Good
    Reason (as defined in his employment agreement),
    11/2
    times annual base salary) and (B) target bonus ($500,000),
    (ii) payment of accrued and unused personal days ($26,375),
    (iii) payment of premiums under the Consolidated Omnibus
    Budget Reconciliation Act of 1985, as amended for a period of
    18 months after termination ($14,401), (iv) vesting of
    the portion of his RSUs (or corresponding cash award payment)
    scheduled to vest on the next vesting date following the
    termination date (or, in the case of a cash award payment
    related to a termination occurring prior to July 1, 2007,
    the next 2 vesting dates) ($700,000) and (v) an additional
    tax gross-up payment of $2,886,147.(10)
    
    Under Mr. Lutzs Special
    Termination Agreement, Mr. Lutz would have been entitled to
    the following: (i) payment equal to 299% of the sum of his
    (A) annual base salary in 2006 ($500,000) and
    (B) target bonus for 2006 ($500,000), (ii) for a
    period of 2 years after his termination, continuation of
    medical, dental, life insurance, disability, accidental death
    and dismemberment benefits and other welfare benefits, subject
    to certain exceptions ($12,417), (iii) if
    Mr. Lutzs employment is involuntarily terminated by
    us (other than for Cause) or there is a reduction or adverse
    change in Mr. Lutzs duties or compensation and
    Mr. Lutz terminates his employment within six months prior
    to a Change of Control and in anticipation of a Change of
    Control, the vesting of all unvested RSUs (or corresponding cash
    award payment, in the amount of $1,225,000),
    (iv) reimbursement for outplacement services,
    (v) payment of any earned but unpaid salary, bonus or
    incentive compensation and (vi) an additional tax
    gross-up
    payment of $7,610,423. In addition, pursuant to his employment
    agreement, Mr. Lutz would have been entitled to
    acceleration of his unpaid retention bonus ($375,000) upon a
    Change in Control (as defined in his Special Termination
    Agreement).(11)
    
    Under Mr. Roberts
    Managing Director Agreement, Mr. Roberts would have been
    entitled to payment equal to six months of his base salary
    ($650,000). 97




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##### 



(12)
    
    Under Mr. Roberts
    Special Termination Agreement, Mr. Roberts would have been
    entitled to the following: (i) payment equal to the sum of
    his (A) annual base salary in 2006 ($650,000) and
    (B) potential bonus or incentive compensation (20% of base
    salary or $130,000), (ii) for a period of 2 years
    after his termination, continuation of medical, dental, life
    insurance, disability, accidental death and dismemberment
    benefits and other welfare benefits, subject to certain
    exceptions ($12,759), (iii) if Mr. Roberts
    employment is involuntarily terminated by us (other than for
    Cause) or (ii) there is a reduction or adverse change in
    Mr. Roberts duties or compensation and
    Mr. Roberts terminates his employment within six months
    prior to a Change of Control and in anticipation of a Change of
    Control, the vesting of all unvested options and RSUs (an
    additional 20,000 options and 93,177 RSUs valued at $707,703),
    (iv) reimbursement for outplacement services,
    (v) payment of any earned but unpaid salary, bonus or
    incentive compensation and (vi) an additional
    gross-up
    payment of $2,640,791.  Change of Control Provisions Under the LTIP.
  Managing
    Director Compensation Plan
      Director
    Compensation
   98




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##### 




    an annual fee of $40,000;
    a meeting fee of $2,000 for attendance in person at any meeting
    of the Board or a committee of the Board and $1,000 for
    attendance by telephone (members of the Audit Committee are paid
    $2,000 for attendance at any Audit Committee meeting, whether
    they attended in person or by telephone);
    a grant of stock options to purchase up to 15,000 shares of
    common stock upon initial election to the Board;
    a grant of stock options to purchase up to 5,000 shares of
    common stock upon initial election as the Chair of the Audit
    Committee; and
    a grant of 8,000 shares of restricted common stock
    immediately following each annual meeting of stockholders.  2006 Director
    Compensation Table
  Fees Earnedor Paidin Cash


Stock Awards


Option Awards


TotalName

($)


($)(2)


($)(3)(4)


($)Douglas C. Allred


70,000



65,760







135,760Betsy J. Bernard


66,000



65,760







131,760Spencer C. Fleischer


75,000



65,760



32,376



173,136Wolfgang Kemna


73,000



65,760







138,760Albert L. Lord


98,000



65,760







163,760Alice M. Rivlin (1)


47,000



65,760







112,760J. Terry Strange


113,000



65,760



5,482



184,242     (1)
    
    Ms. Rivlin did not stand for
    re-election at our annual meeting of stockholders held on
    December 14, 2006.(2)
    
    Reflects the dollar amount
    recognized for financial statement reporting purposes for the
    year ended December 31, 2006, in accordance with SFAS
    123(R) with respect to grants of restricted stock in 2006.
    During 2006, each director was granted 8,000 shares of
    restricted common stock, each with a fair value of $65,760. In
    accordance with SFAS 123(R), fair value is calculated using the
    closing price of our common stock on the date of grant.(3)
    
    Reflects the dollar amount
    recognized for financial statement reporting purposes for the
    year ended December 31, 2006, in accordance with
    SFAS 123(R) with respect to stock option awards granted
    prior to 2006. No stock options were awarded to these
    individuals in 2006. In accordance with SFAS 123(R), fair
    value was estimated using the Black-Scholes option-pricing model.(4)
    
    Outstanding equity awards for each
    non-employee director is as follows (for a description of the
    beneficial ownership by our directors, see Item 12,
    Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters):  99




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##### 



Outstanding


OutstandingStock Awards at


Option Awards atDecember 31,


December 31,Name

2006


2006Douglas C. Allred


28,000



15,000Betsy J. Bernard


16,000



15,000Spencer C. Fleischer


8,000



15,000Wolfgang Kemna


28,000



15,000Albert L. Lord


24,000



15,000Alice M. Rivlin (1)


28,000



20,000J. Terry Strange


24,000



20,000     (1)
    
    Ms. Rivlin did not stand for
    re-election at our annual meeting of stockholders held on
    December 14, 2006.   100




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##### 



ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Beneficial
    Ownership of More Than Five Percent
    Common StockPercentage ofName and Address of 5% Holders of Common Stock

Number of Shares


Shares OutstandingAriel Capital Management, LLC (1)


30,201,218



15.0
%200 E. Randolph Drive,
    Suite 2900Chicago, IL 60601Glenview Capital Management, LLC
    (2)


20,599,345



10.2767 Fifth Avenue,
    44th FloorNew York, NY 10153Thornburg Investment Management,
    Inc (3)


18,003,408



8.9119 E. Marcy StreetSanta Fe, NM 87501Goldman Sachs Asset Management,
    L.P. (4)


13,914,809



6.932 Old SlipNew York, NY 10005    (1)
    
    Represents shares beneficially held
    by Ariel Capital Management, LLC (Ariel), as
    reported on a Schedule 13G filed on February 14, 2007.
    Ariel has sole voting power with respect to
    26,112,088 shares and sole dispositive power with respect
    to 30,181,188 shares. These shares are beneficially owned
    by investment advisory clients of Ariel.(2)
    
    Represents shares beneficially held
    by Glenview Capital Management, LLC (Glenview),
    Glenview Capital GP, LLC (Glenview GP) and Lawrence
    M. Robbins, as reported on a Schedule 13G filed on
    February 14, 2007. Glenview serves as investment manager to
    various entities and as such may be deemed to have voting and
    dispositive power of such shares. Glenview GP is a general
    partner of, and serves as the sponsor of, various funds and as
    such, may be deemed to have voting and dispositive power over
    such shares. Mr. Robbins is the Chief Executive Officer of
    Glenview and Glenview GP.(3)
    
    Represents shares beneficially held
    by Thornburg Investment Management, Inc (Thornburg),
    as reported on a Schedule 13G filed on April 19, 2007.
    Thornburg has sole voting power with respect to
    11,008,109 shares and sole dispositive power with respect
    to 18,003,408 shares.(4)
    
    Represents shares beneficially held
    by Goldman Sachs Asset Management, L.P. (Goldman
    Sachs), as reported on a Schedule 13G filed on
    February 12, 2007. Goldman Sachs has sole voting power with
    respect to 13,766,568 shares and sole dispositive power
    with respect to 13,914,809 shares. 101




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##### 



Security
    Ownership of Directors and Executive Officers
  Rule 13d-3
  Common StockPercentage ofName and Address (1)

Number of Shares


Shares OutstandingHarry L. You (2)


1,072,500



*Roderick C. McGeary (3)


621,828



*Douglas C. Allred (4)


51,000



*Betsy J. Bernard (5)


39,000



*Judy A. Ethell (6)


790,600



*Spencer Fleischer (7)


31,000



*Jill S. Kanin-Lovers






*Wolfgang Kemna (8)


51,000



*Albert L. Lord (9)


58,600



*Laurent C. Lutz






*Richard J. Roberts (10)(11)


600,468



*J. Terry Strange (12)


57,000



*All executive officers and
    directors as a group (12 persons)


3,372,996



1.6
%    *
    
    Less than 1% of our common stock
    outstanding.(1)
    
    The address for all persons listed
    is
    c/o BearingPoint,
    Inc., 1676 International Drive, McLean, Virginia 22102 USA.(2)
    
    Includes 62,500 vested RSUs and
    1,000,000 shares of common stock that may be acquired
    through the exercise of stock options within 60 days of
    June 1, 2007. All 62,500 vested RSUs were scheduled for
    settlement but have not yet settled.(3)
    
    Includes 7,352 vested RSUs and
    472,928 shares of common stock that may be acquired through
    the exercise of stock options within 60 days of
    June 1, 2007. All 7,352 vested RSUs were scheduled for
    settlement but have not yet settled.(4)
    
    Includes 15,000 shares of
    common stock that may be acquired through the exercise of stock
    options within 60 days of June 1, 2007.(5)
    
    Includes 15,000 shares of
    common stock that may be acquired through the exercise of stock
    options within 60 days of June 1, 2007.(6)
    
    Includes 280,600 vested RSUs, and
    300,000 shares of common stock that may be acquired through
    the exercise of stock options within 60 days of
    June 1, 2007 (assumes vesting of 150,000 RSUs and 52,700
    options on July 1, 2007 that are subject to Ms. Ethell
    achieving certain performance criteria). Also includes 210,000
    vested RSUs held by Robert R. Glatz, Ms. Ethells
    spouse. All 430,600 vested RSUs were scheduled for settlement
    but have not yet settled.(7)
    
    Includes 15,000 shares of
    common stock that may be acquired through the exercise of stock
    options within 60 days of June 1, 2007.
    Mr. Fleischer is a senior managing member of Friedman
    Fleischer & Lowe GP II, LLC, a Delaware limited
    liability company (FFL GP). FFL GP is the general
    partner of Friedman Fleischer & Lowe GP II, L.P.,
    which is the general partner of each of Friedman
    Fleischer & Lowe Capital Partners II, L.P. (FFL
    Capital Partners), FFL Parallel Fund II, L.P.
    (FFL Parallel Fund) and FFL Executive Partners II,
    L.P. (FFL Executive Partners, and together with FFL
    Capital Partners and FFL Parallel Fund, the FFL
    Funds). The FFL Funds are the owners of record of
    $40 million of initial principal amount of
    0.50% Convertible Senior Subordinated Debentures due July
    2010 102




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##### 



and warrants to purchase up to
    3.5 million shares of common stock. Mr. Fleischer
    disclaims any beneficial ownership of the securities owned by
    the FFL Funds, except to the extent of his pecuniary interest
    therein, if any.(8)
    
    Includes 15,000 shares of
    common stock that may be acquired through the exercise of stock
    options within 60 days of June 1, 2007.(9)
    
    Includes 15,000 shares of
    common stock that may be acquired through the exercise of stock
    options within 60 days of June 1, 2007.(10)
    
    Includes 4,301 shares held
    through a family trust, 173,076 vested RSUs and
    361,708 shares of common stock that may be acquired through
    the exercise of stock options within 60 days of
    June 1, 2007. Of the 361,708 vested RSUs, 111,110 RSUs were
    scheduled for settlement but have not yet settled.(11)
    
    Effective as of January 8,
    2007, Mr. Roberts no longer serves as our Chief Operating
    Officer in connection with the appointment of F. Edwin Harbach
    as our President and Chief Operating Officer.(12)
    
    Includes 20,000 shares of
    common stock that may be acquired through the exercise of stock
    options within 60 days of June 1, 2007. 103




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##### 



ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE  Friedman
    Fleischer & Lowe, LLC /Spencer C.
    Fleischer
    Judy
    Ethell/Robert Glatz
    Director
    Independence
     104




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##### 



ITEM 14.
    PRINCIPAL ACCOUNTANT FEES AND SERVICES  Audit
    Committee Pre-Approval Policies
  Rule 2-01 Regulation S-X.
  Independent
    Registered Public Accountants Fees
    Fiscal Year Ended,Type of Fee

December 31, 2006


December 31, 2005Audit Fees (1)

$
30,979,000


$
33,900,000Audit Related Fees (2)


275,000



159,300Tax Fees (3)


960,000



1,956,800All Other Fees (4)


15,000



33,000Total

$
32,229,000


$
36,049,100     (1)
    
    Audit fees include audits of
    consolidated financial statements, reviews of unaudited
    quarterly financial statements and services that are normally
    provided by independent auditors in connection with statutory
    and regulatory filings.(2)
    
    Audit related fees include
    assurance and related services provided by our independent
    auditors that are reasonably related to the performance of the
    audit or review of our consolidated financial statements and are
    not included above under Audit Fees. These services
    principally include audits of employee benefit plans, accounting
    consultations, and other services in connection with regulatory
    reporting requirements.(3)
    
    Tax services principally include
    consultation in connection with tax compliance, tax
    consultations and tax planning.(4)
    
    All other fees include licenses to
    technical accounting research software. 105




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##### 



PART IV  Item 15.
    EXHIBITS
    AND FINANCIAL STATEMENT SCHEDULES        Exhibit No.

Description3
.1

Amended and Restated Certificate
    of Incorporation, dated as of February 7, 2001, which is
    incorporated herein by reference to Exhibit 3.1 from the
    Companys
    Form 10-Q
    for the quarter ended March 31, 2001.3
.2

Amended and Restated Bylaws,
    amended and restated as of May 5, 2004, which is
    incorporated herein by reference to Exhibit 3.1 from the
    Companys
    Form 10-Q
    for the quarter ended March 31, 2004.3
.3

Certificate of Ownership and
    Merger merging Bones Holding into the Company, dated
    October 2, 2002, which is incorporated herein by reference
    to Exhibit 3.3 from the Companys
    Form 10-Q
    for the quarter ended September 30, 2002.4
.1

Rights Agreement, dated as of
    October 2, 2001, between the Company and EquiServe
    Trust Company, N.A., which is incorporated herein by
    reference to Exhibit 1.1 from the Companys
    Registration Statement on
    Form 8-A
    dated October 3, 2001.4
.2

Certificate of Designation of
    Series A Junior Participating Preferred Stock, which is
    incorporated herein by reference to Exhibit 1.2 from the
    Companys Registration Statement on
    Form 8-A
    dated October 3, 2001.4
.3

Amendment No. 1 to the Rights
    Agreement between the Company and EquiServe Trust Company,
    N.A., which is incorporated herein by reference to
    Exhibit 99.1 from the Companys
    Form 8-K
    filed on September 6, 2002.10
.1

Amended and Restated Separation
    Agreement, dated as of February 13, 2001, among KPMG LLP,
    KPMG Consulting, LLC and the Company, which is incorporated
    herein by reference to Exhibit 10.1 from the Companys
    Form 10-Q
    for the quarter ended March 31, 2001.10
.2

Transition Services Agreement,
    dated as of February 13, 2001, among KPMG LLP, KPMG
    Consulting, LLC and the Company, which is incorporated herein by
    reference to Exhibit 10.3 from the Companys
    Form 10-Q
    for the quarter ended March 31, 2001.10
.3

Stock Purchase Agreement dated as
    of December 29, 1999, between Cisco Systems, Inc. and the
    Company, which is incorporated herein by reference to
    Exhibit 10.11 from the Companys
    Form S-1.
    (Registration
    No. 333-36328)
    (referred to below as the Companys
    Form S-1)10
.4

Investor Rights Agreement dated as
    of January 31, 2000, among KPMG LLP, Cisco Systems, Inc.
    and the Company, which is incorporated herein by reference to
    Exhibit 10.12 from the Companys
    Form S-1.10
.5

Irrevocable Waiver, dated
    May 17, 2004, by Cisco Systems, Inc. with respect to the
    Investor Rights Agreement, dated January 31, 2000 and the
    Stock Purchase Agreement, dated December 29, 1999, which is
    incorporated herein by reference to Exhibit 10.49 of the
    Companys
    Form S-1/A
    (Registration
    No. 333-100199). 106




---



##### 



Exhibit No.

Description10
.6

Credit Agreement dated as of
    May 18, 2007, as amended and restated on June 1, 2007,
    among the Company, BearingPoint, LLC, the guarantors party
    thereto, the lenders party thereto, UBS Securities LLC, Morgan
    Stanley Senior Funding, Inc., UBS AG, Stamford Branch and Wells
    Fargo Foothill, LLC.10
.7

Security Agreement dated as of
    May 18, 2007, among the Company, BearingPoint, LLC, the
    guarantors party thereto and UBS AG, Stamford Branch, as
    Collateral Agent.10
.8

Form of Term Note under the Credit
    Agreement dated as of May 18, 2007.10
.9

Form of 2.50% Series A
    Convertible Subordinated Debentures due 2024, which is
    incorporated by reference to Exhibit 10.66 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.10

Form of 2.75% Series B
    Convertible Subordinated Debentures due 2024, which is
    incorporated by reference to Exhibit 10.67 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.11

Purchase Agreement, dated as of
    December 16, 2004, among the Company and the Initial
    Purchasers named therein, which is incorporated by reference to
    Exhibit 10.68 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.12

Indenture, dated as of
    December 22, 2004, by and between the Company and The Bank
    of New York, as trustee, which is incorporated by reference to
    Exhibit 99.1 from the Companys
    Form 8-K
    filed on March 10, 2006.10
.13

First Supplemental Indenture,
    dated as of November 7, 2006, between BearingPoint, Inc.
    and The Bank of New York, as trustee under the Indenture, dated
    as of December 22, 2004, which is incorporated by reference
    to Exhibit 99.1 from the Companys
    Form 8-K
    filed on November 8, 2006.10
.14

Resale Registration Rights
    Agreement, dated December 22, 2004, between the Company and
    the Initial Purchasers, which is incorporated by reference to
    Exhibit 10.70 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.15

Form of 5.00% Convertible
    Senior Subordinated Debentures due 2025, which is incorporated
    by reference to Exhibit 10.71 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.16

Form of Securities Purchase
    Agreement, dated April 21, 2005, among the Company and the
    purchasers named therein, which is incorporated by reference to
    Exhibit 10.72 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.17

Indenture, dated as of
    April 27, 2005, by and between the Company and the Bank of
    New York, as trustee, which is incorporated by reference to
    Exhibit 99.1 from the Companys
    Form 8-K
    filed on March 10, 2006.10
.18

First Supplemental Indenture,
    dated as of November 2, 2006, between BearingPoint, Inc.
    and The Bank of New York, as trustee under the Indenture, dated
    as of April 27, 2005, providing for the issuance of an
    aggregate principal amount of $200,000,000 of
    5.00% Convertible Senior Subordinated Debentures Due 2025,
    which is incorporated by reference to Exhibit 99.2 from the
    Companys
    Form 8-K
    filed on November 3, 2006.10
.19

Registration Rights Agreement,
    dated April 27, 2005, between the Company and the placement
    agents, which is incorporated by reference to Exhibit 10.74
    from the Companys
    Form 10-K
    for the year ended December 31, 2004. 107




---



##### 



Exhibit No.

Description10
.20

Securities Purchase Agreement,
    dated July 15, 2005, among the Company and certain
    affiliates of Friedman Fleischer & Lowe, LLC, which is
    incorporated by reference to Exhibit 10.75 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.21

Form of 0.50% Convertible
    Senior Subordinated Debentures due July 2010, which is
    incorporated by reference to Exhibit 10.76 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.22

Form of Warrant Certificate, dated
    July 15, 2005, which is incorporated by reference to
    Exhibit 10.77 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.23

Registration Rights Agreement,
    dated July 15, 2005, between the Company and Friedman
    Fleischer & Lowe, LLC, which is incorporated by
    reference to Exhibit 10.78 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.24

Amended and Restated 2000
    Long-Term Incentive Plan, effective as of February 2, 2007.10
.25

Employee Stock Purchase Plan, as
    amended and restated as of February 1, 2007.10
.26

Amended and Restated 401(k) Plan
    dated August 21, 2003, which is incorporated herein by
    reference to Exhibit 10.19 from the Companys
    Form 10-K
    for the year ended June 30, 2003.10
.27

Amendment No. 1 to Amended
    and Restated 401(k) Plan dated April 29, 2004, which is
    incorporated herein by reference to Exhibit 10.20 from the
    Companys
    Form S-1/A
    (Registration
    No. 333-100199).10
.28

Amendment No. 2 to Amended
    and Restated 401(k) Plan dated June 24, 2005, which is
    incorporated by reference to Exhibit 10.24 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.29

Amendment No. 3 to Amended
    and Restated 401(k) Plan dated August 22, 2005, which is
    incorporated by reference to Exhibit 10.25 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.30

Amendment No. 4 to Amended
    and Restated 401(k) Plan dated November 1, 2005, which is
    incorporated by reference to Exhibit 10.26 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.31

Amendment No. 5 to Amended
    and Restated 401(k) Plan, effective as of September 14,
    2006.10
.32

Amendment No. 6 to Amended
    and Restated 401(k) Plan, effective as of January 1, 2006.10
.33

Amendment No. 7 to Amended
    and Restated 401(k) Plan, effective as of May 1, 2007.10
.34

Deferred Compensation Plan, as
    amended and restated as of August 1, 2003, which is
    incorporated herein by reference to Exhibit 10.20 from the
    Companys
    Form 10-K
    for the year ended June 30, 2003.10
.35

Amendment to Deferred Compensation
    Plan effective as of December 31, 2004, which is
    incorporated by reference to Exhibit 10.28 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.36

Amended and Restated BearingPoint,
    Inc. Managing Directors Deferred Compensation Plan dated
    January 1, 2006, which is incorporated by reference to
    Exhibit 10.30 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.37

Form of Member Distribution
    Agreement for KPMG Consulting Qualified Employees, which is
    incorporated herein by reference to Exhibit 10.6 from the
    Companys
    Form S-1
    (including for Richard Roberts). 108




---



##### 



Exhibit No.

Description10
.38

Form of Amendment to the Managing
    Director Agreement, dated as of January 31, 2005, between
    the Company and certain executive officers (including for
    Richard Roberts), which is incorporated by reference to
    Exhibit 10.8 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.39

Form of Managing Director
    Agreement (including for Roderick C. McGeary).10
.40

Form of Managing Director
    Agreement.10
.41

Form of Special Termination
    Agreement (including for Richard Roberts), which is incorporated
    by reference to Exhibit 10.93 from the Companys
    Form 10-K
    for the year ended December 31, 2005.10
.42

Form of Restricted Stock Agreement
    with certain officers of the Company pursuant to the 2000
    Long-Term Incentive Plan, which is incorporated herein by
    reference to Exhibit 10.5 from the Companys
    Form 10-Q
    for the quarter ended September 30, 2002.10
.43

Form of Restricted Stock Agreement
    with non-employee directors of the Company pursuant to the
    Amended and Restated Long-Term Incentive Plan, which is
    incorporated herein by reference to Exhibit 10.5 from the
    Companys
    Form 10-Q
    for the quarter ended December 31, 2002.10
.44

Form of Restricted Stock Unit
    agreement under the Companys 2000 Long-Term Incentive Plan
    for managing directors and employees, which is incorporated by
    reference to Exhibit 10.81 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.45

Form of Performance Share Award
    Unit Agreement, which is incorporated by reference to
    Exhibit 99.1 from the Companys
    Form 8-K
    filed with the SEC on February 8, 2007.10
.46

Form of Performance Cash Award
    Agreement, which is incorporated by reference to
    Exhibit 99.2 from the Companys
    Form 8-K
    filed with the SEC on February 8, 2007.10
.47

Employment Letter, effective as of
    March 21, 2005, between the Company and Harry L. You, which
    is incorporated by reference to Exhibit 10.86 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.48

Managing Director Agreement, dated
    as of March 21, 2005, between the Company and Harry L. You,
    which is incorporated by reference to Exhibit 10.87 from
    the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.49

Restricted Stock Unit Agreement,
    dated March 21, 2005, between the Company and Harry L. You,
    which is incorporated by reference to Exhibit 10.88 from
    the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.50

Special Termination Agreement,
    dated as of March 21, 2005, between the Company and Harry
    L. You, which is incorporated by reference to Exhibit 10.89
    from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.51

Stock Option Agreement, between
    the Company and Harry L. You, which is incorporated by reference
    to Exhibit 10.90 from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.52

Form of Restricted Stock Unit
    Agreement awarded to Harry You and Roderick C. McGeary, which is
    incorporated by reference to Exhibit 99.2 from the
    Companys
    Form 8-K
    field with the SEC on February 13, 2007.10
.53

Employment Letter, effective as of
    July 1, 2005, between the Company and Judy A. Ethell, which
    is incorporated by reference to Exhibit 10.91 from the
    Companys
    Form 10-K
    for the year ended December 31, 2004.10
.54

Managing Director Agreement, dated
    as of July 1, 2005, between the Company and Judy A. Ethell. 109




---



##### 



Exhibit No.

Description10
.55

Special Termination Agreement,
    dated as of July 1, 2005, between the Company and Judy A.
    Ethell, which is incorporated by reference to Exhibit 10.93
    from the Companys
    Form 10-K
    for the year ended December 31, 2004.10
.56

Letter Agreement dated
    October 3, 2006, between the Company and Judy A. Ethell,
    which is incorporated by reference to Exhibit 10.95 from
    the Companys
    Form 10-K
    for the year ended December 31, 2005.10
.57

Restricted Stock Unit Agreement
    for 292,000 restricted stock units, dated September 19,
    2006, between the Company and Judy A. Ethell, which is
    incorporated by reference to Exhibit 10.96 from the
    Companys
    Form 10-K
    for the year ended December 31, 2005.10
.58

Restricted Stock Unit Agreement
    for 94,000 restricted stock units, dated September 19,
    2006, between the Company and Judy A. Ethell, which is
    incorporated by reference to Exhibit 10.97 from the
    Companys
    Form 10-K
    for the year ended December 31, 2005.10
.59

Employment Letter, effective as of
    February 24, 2006, between the Company and Laurent C. Lutz,
    which is incorporated by reference to Exhibit 10.91 from
    the Companys
    Form 10-K
    for the year ended December 31, 2005.10
.60

Managing Director Agreement, dated
    as of February 24, 2006, between the Company and Laurent C.
    Lutz, which is incorporated by reference to Exhibit 10.92
    from the Companys
    Form 10-K
    for the year ended December 31, 2005.10
.61

Special Termination Agreement,
    dated as of February 24, 2006, between the Company and
    Laurent C. Lutz, which is incorporated by reference to
    Exhibit 10.94 from the Companys
    Form 10-K
    for the year ended December 31, 2005.10
.62

Employment Letter, effective as of
    January 8, 2007, between the Company and F. Edwin Harbach,
    which is incorporated by reference to Exhibit 99.2 from the
    Companys
    Form 8-K
    filed with the SEC on January 12, 2007.10
.63

Managing Director Agreement, dated
    as of January 8, 2007, between the Company and F. Edwin
    Harbach, which is incorporated by reference to Exhibit 99.3
    from the Companys
    Form 8-K
    filed with the SEC on January 12, 2007.10
.64

Special Termination Agreement,
    dated as of January 8, 2007, between the Company and F.
    Edwin Harbach, which is incorporated by reference to
    Exhibit 99.4 from the Companys
    Form 8-K
    filed with the SEC on January 12, 2007.10
.65

Restricted Stock Unit Agreement,
    dated January 8, 2007, between the Company and F. Edwin
    Harbach, which is incorporated by reference to Exhibit 99.5
    from the Companys
    Form 8-K
    filed with the SEC on January 12, 2007.14
.1

Standards of Business Conduct.16
.1

Letter dated June 28, 2007,
    from PricewaterhouseCoopers LLP to the Securities and Exchange
    Commission.21
.1

List of subsidiaries of the
    Registrant.31
.1

Certification of Chief Executive
    Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a).31
.2

Certification of Chief Financial
    Officer pursuant to
    Rule 13a-14(a)
    or 15d-14(a).32
.1

Certification of Chief Executive
    Officer pursuant to Section 1350.32
.2

Certification of Chief Financial
    Officer pursuant to Section 1350.  110




---



##### 



SIGNATURES      By:
    /s/  Harry
    L. You  Name: Harry L.
    You
 Title: Chief Executive
    Officer
    Signature

Title/s/  Harry
    L. YouHarry
    L. You

Director, and Chief Executive
    Officer (principal executive officer)/s/  Judy
    A. EthellJudy
    A. Ethell

Chief Financial Officer (principal
    financial and accounting officer)/s/  Roderick
    C. McGearyRoderick
    C. McGeary

Chairman of the Board of Directors/s/  Douglas
    C. AllredDouglas
    C. Allred

Director/s/  Betsy
    J. BernardBetsy
    J. Bernard

Director/s/  Spencer
    C. FleischerSpencer
    C. Fleischer

Director/s/  Jill
    S. Kanin-LoversJill
    S. Kanin-Lovers

Director/s/  Wolfgang
    KemnaWolfgang
    Kemna

Director/s/  Albert
    L. LordAlbert
    L. Lord

Director/s/  J.
    Terry StrangeJ.
    Terry Strange

Director  111




---



##### 



ITEM 8:
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  BEARINGPOINT,
    INC.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageReport of Independent Registered
    Public Accounting Firm


F-2Consolidated Balance Sheets at
    December 31, 2006 and 2005


F-7Consolidated Statements of
    Operations for the years ended December 31, 2006, 2005 and
    2004


F-8Consolidated Statements of Changes
    in Stockholders Equity (Deficit) for the years ended
    December 31, 2006, 2005 and 2004


F-9Consolidated Statements of Cash
    Flows for the years ended December 31, 2006, 2005 and 2004


F-11Notes to Consolidated Financial
    Statements


F-12  F-1




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      Consolidated financial statements
      Internal control over financial reporting
  Internal
    ControlIntegrated Framework
 F-2




---



##### 



1.
  
    The Company did not maintain a sufficient complement of
    personnel in foreign locations with an appropriate level of
    knowledge, experience and training in the application of
    generally accepted accounting principles in the United States of
    America (GAAP) and in internal control over
    financial reporting commensurate with financial reporting
    requirements.
    The Company did not maintain and communicate sufficient
    formalized and consistent finance and accounting policies and
    procedures. The Company also did not maintain effective controls
    designed to prevent or detect instances of non-compliance with
    established policies and procedures specifically with respect to
    the application of accounting policies at foreign locations.
    The Company did not enforce the consistent performance of manual
    controls designed to complement system controls over the North
    American financial accounting system. As a result, transactions
    and data were not completely and accurately recorded, processed
    and reported in the financial statements.
    The Company did not maintain adequate controls to ensure that
    employees could report actual or perceived violations of
    policies and procedures. In addition, the Company did not have
    sufficient F-3




---



##### 



procedures to ensure the appropriate notification,
    investigation, resolution and remediation procedures were
    applied to reported violations.    2.
  
    The Company did not maintain formal, written policies and
    procedures governing the financial close and reporting process.
    The Company did not maintain effective controls to ensure that
    management oversight and review procedures were properly
    performed over the accounts and disclosures in the financial
    statements. In addition, the Company did not maintain effective
    controls to ensure adequate management reporting information was
    available to monitor financial statement accounts and
    disclosures.
    The Company did not maintain effective controls over the
    recording of recurring and non-recurring journal entries.
    Specifically, effective controls were not designed and in place
    to provide reasonable assurance that journal entries were
    prepared with sufficient supporting documentation and reviewed
    and approved to ensure the completeness and accuracy of the
    entries recorded.
    The Company did not maintain effective controls to provide
    reasonable assurance that accounts were complete and accurate
    and agreed to detailed support and that reconciliations of
    accounts were properly performed, reviewed and approved.
    The Company did not maintain effective controls to provide
    reasonable assurance that foreign currency translation amounts
    resulting from intercompany loans were accurately recorded and
    reported in the consolidated financial statements.    3.
  
    The Company did not design and maintain effective controls to
    provide reasonable assurance over the initiation, recording,
    processing, and reporting of customer contracts, including the
    existence of and adherence to policies and procedures, adequate
    segregation of duties and adequate monitoring by management.
    The Company did not design and maintain effective controls to
    provide reasonable assurance that contract costs, such as
    engagement subcontractor costs, were completely and accurately
    accumulated.
    The Company did not design and maintain effective controls to
    provide reasonable assurance that the Company adequately
    evaluated customer contracts to identify and provide reasonable
    assurance regarding the proper application of the appropriate
    method of revenue recognition in accordance with GAAP. F-4




---



##### 




    The Company did not design and maintain effective controls to
    provide reasonable assurance regarding the completeness of
    information recorded in the financial accounting system.
    Specifically, the Company did not design and have in place
    effective controls to provide reasonable assurance that invoices
    issued outside of the financial accounting system were
    appropriately recorded in the general ledger. As a result, the
    Company did not ensure that cash received was applied to the
    correct accounts in the appropriate accounting period.  4.
  5.
  6.
  7.
  8.
 F-5




---



##### 



9.
  
    The Company did not design and maintain effective controls over
    the accuracy and completeness of the components of income tax
    provision calculations and related reconciliation of income tax
    payable and of differences between the tax and financial
    reporting basis of assets and liabilities with deferred income
    tax assets and liabilities. The Company also did not maintain
    effective controls to identify and determine permanent
    differences between income for tax and financial reporting
    income purposes.
    The Company did not maintain effective controls, including
    monitoring, over the calculation and recording of foreign income
    taxes, including tax reserves, acquired tax contingencies
    associated with business combinations and the income tax impact
    of foreign debt recapitalization. In addition, the Company did
    not maintain effective controls over determining the correct
    foreign jurisdictions or tax treatment of certain foreign
    subsidiaries for United States tax purposes.
    The Company did not design and maintain effective controls over
    withholding taxes associated with interest payable on
    intercompany loans and intercompany trade payables between
    various tax jurisdictions.    Internal
    ControlIntegrated Framework Internal ControlIntegrated Framework
     F-6




---



##### 



BEARINGPOINT,
    INC.
  CONSOLIDATED
    BALANCE SHEETS
 (in
    thousands, except share amounts)
  December 31,2006


2005ASSETSCurrent assets:Cash and cash equivalents

$
389,571


$
255,340Restricted cash (note 2)


3,097



121,247Accounts receivable, net of
    allowance for doubtful accounts of $5,927 at December 31,
    2006 and $9,326 at December 31, 2005


361,638



432,415Unbilled revenue


341,357



355,137Income tax receivable


1,414



10,867Deferred income taxes


7,621



18,991Prepaid expenses


33,677



35,875Other current assets


65,611



40,345Total current assets


1,203,986



1,270,217Property and equipment, net


146,392



170,133Goodwill


463,446



427,688Other intangible assets, net






1,545Deferred income taxes, less current
    portion


41,663



20,915Other assets


83,753



81,928Total assets

$
1,939,240


$
1,972,426LIABILITIES AND
    STOCKHOLDERS DEFICITCurrent liabilities:Current portion of notes payable

$
360


$
6,393Accounts payable


295,109



286,273Accrued payroll and employee
    benefits


344,715



309,510Deferred revenue


131,313



166,647Income tax payable


33,324



41,839Current portion of accrued lease
    and facilities charges


17,126



12,515Deferred income taxes


20,109



10,095Accrued legal settlements


59,718



38,601Other current liabilities


135,837



169,624Total current liabilities


1,037,611



1,041,497Notes payable, less current portion


671,490



668,367Accrued employee benefits


116,087



92,338Accrued lease and facilities
    charges, less current portion


49,792



38,082Deferred income taxes, less current
    portion


7,984



22,876Income tax reserve


108,499



89,530Other liabilities


125,078



65,308Total liabilities


2,116,541



2,017,998Commitments and contingencies
    (notes 9, 10, 11)Stockholders deficit:Preferred stock, $.01 par
    value 10,000,000 shares authorized






Common stock, $.01 par value
    1,000,000,000 shares authorized, 205,406,249 shares
    issued and 201,593,999 shares outstanding on
    December 31, 2006 and 205,350,249 shares issued and
    201,537,999 shares outstanding on December 31, 2005


2,044



2,044Additional paid-in capital


1,315,190



1,261,797Accumulated deficit


(1,697,639
)


(1,484,199
)Notes receivable from stockholders


(7,466
)


(7,578
)Accumulated other comprehensive
    income


246,297



218,091Treasury stock, at cost
    (3,812,250 shares)


(35,727
)


(35,727
)Total stockholders deficit


(177,301
)


(45,572
)Total liabilities and
    stockholders deficit

$
1,939,240


$
1,972,426    F-7




---



##### 



BEARINGPOINT,
    INC.



CONSOLIDATED
    STATEMENTS OF OPERATIONS

(in
    thousands, except share and per share amounts)  Year Ended December 31,2006


2005


2004Revenue

$
3,444,003


$
3,388,900


$
3,375,782Costs of service:Professional compensation


1,716,632



1,770,405



1,532,423Other direct contract expenses


896,999



972,787



991,493Lease and facilities restructuring
    charges


29,621



29,581



11,699Other costs of service


250,225



258,135



292,643Total costs of service


2,893,477



3,030,908



2,828,258Gross profit


550,526



357,992



547,524Amortization of purchased
    intangible assets


1,545



2,266



3,457Goodwill impairment charge






166,415



397,065Selling, general and
    administrative expenses


748,250



750,867



641,176Operating loss


(199,269
)


(561,556
)


(494,174
)Interest income


8,749



9,049



1,441Interest expense


(37,182
)


(33,385
)


(18,710
)Loss on early extinguishment of
    debt










(22,617
)Insurance settlement


38,000







Other income (expense), net


8,659



(13,630
)


(375
)Loss before taxes


(181,043
)


(599,522
)


(534,435
)Income tax expense


32,397



122,121



11,791Net loss

$
(213,440
)

$
(721,643
)

$
(546,226
)Loss per sharebasic and
    diluted:Net loss

$
(1.01
)

$
(3.59
)

$
(2.77
)Weighted average sharesbasic
    and diluted


212,154,618



201,020,274



197,039,303    F-8




---



##### 



BEARINGPOINT,
    INC.



CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT)

(in
    thousands)  Notes


AccumulatedCommon Stock


Additional





receivable


otherShares





paid-in


Accumulated


from


comprehensive


Treasury Stock


Comprehensiveissued


Amount


capital


deficit


stockholders


income (loss)


Shares


Amount


loss


TotalBalance at December 31,
    2003


198,295


$
1,973


$
1,105,631


$
(216,330
)

$
(9,114
)

$
223,562



(3,812
)

$
(35,727
)





$
1,069,995Exercise of stock options under
    Long-Term Incentive Plan, including tax benefit of $210


284



3



2,416



























2,419Sale of common stock under Employee
    Stock Purchase Plan, including tax benefit of $1,649


3,642



36



26,309



























26,345Notes receivable from stockholders,
    including $58 in interest and repayment of loan


















1,059



















1,059Restricted stock awards to Board of
    Directors


56



1



452



























453Compensation recognized for
    restricted stock, net of tax benefit of $135










563



























563Compensation recognized for stock
    awards related to transactions involving Andersen Business
    Consulting, net of tax of $1,026


861



9



7,688



























7,697Forfeiture of Founders shares


(5
)


































Comprehensive income (loss):Net loss














(546,226
)

















$
(546,226
)


(546,226
)Derivative instruments, net of tax






















(616
)










(616
)


(616
)Foreign currency translation
    adjustment






















63,009











63,009



63,009Total comprehensive loss

































$
(483,833
)Balance at December 31,
    2004


203,133



2,022



1,143,059



(762,556
)


(8,055
)


285,955



(3,812
)


(35,727
)






624,698Exercise of stock options under
    Long-Term Incentive Plan, including tax benefit of $75


164



1



1,200



























1,201Sale of common stock under Employee
    Stock Purchase Plan, including tax benefit of $520


2,053



21



14,269



























14,290Notes receivable from stockholders,
    including $6 in interest and forgiveness of loan


















477



















477Compensation recognized for stock
    options, restricted stock awards and restricted stock units










82,346



























82,346Payments in lieu of stock issuance
    related to transactions involving Andersen Business Consulting










(4,929
)


























(4,929
)Compensation recognized for stock
    awards related to transactions involving Andersen Business
    Consulting










3,491



























3,491Beneficial conversion feature
    relating to the July 2005 Senior Debentures










14,288



























14,288Fair value of the July 2005 Warrants










8,073



























8,073Comprehensive loss:Net loss














(721,643
)

















$
(721,643
)


(721,643
)Minimum pension liability






















(13,321
)










(13,321
)


(13,321
)Foreign currency translation
    adjustment






















(54,543
)










(54,543
)


(54,543
)Total comprehensive loss

































$
(789,507
)Balance at December 31,
    2005


205,350



2,044



1,261,797



(1,484,199
)


(7,578
)


218,091



(3,812
)


(35,727
)






(45,572
)    F-9




---



##### 



BEARINGPOINT,
    INC.



CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
    (DEFICIT)  (Continued)

(in
    thousands)  Notes


AccumulatedCommon Stock


Additional





receivable


otherShares





paid-in


Accumulated


from


comprehensive


Treasury Stock


Comprehensiveissued


Amount


capital


deficit


stockholders


income (loss)


Shares


Amount


loss


TotalBalance at December 31,
    2005


205,350


$
2,044


$
1,261,797


$
(1,484,199
)

$
(7,578
)

$
218,091



(3,812
)

$
(35,727
)





$
(45,572
)Notes receivable from stockholders,including $3 in interest and
    forgiveness of loan


















112



















112Restricted stock awards to Board of
    Directors


56







460



























460Compensation recognized for stock
    options and restricted stock units










52,933



























52,933SFAS 158 adjustment, net of
    tax of $3,756






















(11,417
)














(11,417
)Comprehensive income (loss):Net loss














(213,440
)

















$
(213,440
)


(213,440
)Minimum pension liability, net of
    tax of $2,961






















8,880











8,880



8,880Foreign currency translation
    adjustment






















30,743











30,743



30,743Total comprehensive loss

































$
(173,817
)Balance at December 31,
    2006


205,406


$
2,044


$
1,315,190


$
(1,697,639
)

$
(7,466
)

$
246,297



(3,812
)

$
(35,727
)





$
(177,301
)    F-10




---



##### 



BEARINGPOINT,
    INC.



CONSOLIDATED
    STATEMENTS OF CASH FLOWS

(in
    thousands)  Year Ended December 31,2006


2005


2004Cash flows from operating
    activities:Net loss

$
(213,440
)

$
(721,643
)

$
(546,226
)Adjustments to reconcile net loss
    to net cash provided by (used in) operating activities:Deferred income taxes


(13,406
)


49,211



39,332Provision (benefit) for doubtful
    accounts


(464
)


5,334



(1,057
)Stock-based compensation


53,393



85,837



9,874Impairment of goodwill






166,415



397,065Depreciation and amortization of
    property and equipment


74,023



70,544



78,690Amortization of purchased
    intangible assets


1,545



2,266



3,457Lease and facilities restructuring
    charges


29,621



29,581



11,699Amortization of debt issuance costs
    and debt accretion


8,936



12,396



2,106Other


(4,780
)


11,597



5,389Changes in assets and liabilities:Accounts receivable


84,124



(52,196
)


(33,180
)Unbilled revenue


19,814



20,492



(62,323
)Income tax receivable, prepaid
    expenses and other current assets


(23,702
)


26,318



(38,581
)Other assets


(5,710
)


(10,025
)


(51,975
)Accounts payable, accrued legal
    settlements and other current liabilities


(14,249
)


58,127



20,006Accrued payroll and employee
    benefits


23,311



47,018



47,574Deferred revenue


(38,605
)


62,788



101,403Income tax reserve and other
    liabilities


78,269



22,869



65,012Net cash provided by (used in)
    operating activities


58,680



(113,071
)


48,265Cash flows from investing
    activities:Purchases of property and equipment


(50,581
)


(40,849
)


(88,334
)Decrease (increase) in restricted
    cash


118,151



(100,194
)


(21,053
)Net cash provided by (used in)
    investing activities


67,570



(141,043
)


(109,387
)Cash flows from financing
    activities:Proceeds from issuance of common
    stock






14,896



26,904Proceeds from issuance of notes
    payable






282,156



1,531,849Repayments of notes payable


(6,506
)


(16,985
)


(1,360,288
)Decrease in book overdrafts


(810
)


(980
)


(22,986
)Payments made in lieu of stock
    issuance






(4,929
)


(Increase) decrease in notes
    receivable from stockholders






(6
)


1,059Net cash provided by (used in)
    financing activities


(7,316
)


274,152



176,538Effect of exchange rate changes on
    cash and cash equivalents


15,297



(9,508
)


6,919Net increase in cash and cash
    equivalents


134,231



10,530



122,335Cash and cash
    equivalentsbeginning of period


255,340



244,810



122,475Cash and cash equivalentsend
    of period

$
389,571


$
255,340


$
244,810Supplementary cash flow information:Interest paid

$
27,582


$
17,547


$
20,480Taxes paid, net of refunds

$
21,333


$
(41,741
)

$
21,397Supplemental non-cash investing and
    financing activities:Beneficial conversion feature
    related to the July 2005 Debentures

$



$
14,288


$
Fair value of July 2005 Warrants

$



$
8,073


$
    F-11




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 (in
    thousands, except share and per share amounts)
  1. Description
    of the Business, Liquidity and Basis of Presentation
 The
    Company     Liquidity   
    The Company has experienced significant recurring net losses. At
    December 31, 2006, the Company had an accumulated deficit
    of $1,697,639 and a total stockholders deficit of $177,301.
    The Companys business has not generated positive cash from
    operating activities in certain quarters during 2006, 2005 and
    2004.
    Due to the material weaknesses in its internal controls, the
    Company continues to experience significant delays in completing
    its consolidated financial statements and filing periodic
    reports with the U.S. Securities and Exchange Commission
    (the SEC) on a timely basis. Accordingly, the
    Company continues to devote substantial additional internal and
    external resources, and experience higher than expected fees for
    audit services.
    Through December 31, 2006, the Company incurred cumulative
    losses of $139,882 under a significant contract and a final
    settlement in 2007 with Hawaiian Telcom Communications, Inc.
    (HT), which consequently resulted in significantly
    less cash from operating activities in 2006 and, management
    believes, 2007.
    The Company currently is a party to a number of disputes that
    involve or may involve litigation or other legal or regulatory
    proceedings. See Note 11, Commitments and
    Contingencies.   F-12




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     2.
    Summary
    of Significant Accounting Policies Principles
    of Consolidation   Use of
    Estimates  F-13




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   Reclassifications  Revenue
    Recognition time-and-materials,
  81-1, (SOP 81-1).
  time-and-materials
   F-14




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  00-21, SOP 81-1, and/or
     Costs of
    Service  F-15




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Selling,
    General and Administrative Expenses  Cash,
    Cash Equivalents and Restricted Cash  Concentrations
    of Credit Risk and Fair Value of Financial Instruments    Valuation
    of Accounts Receivable  F-16




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   Property
    and Equipment SOP 98-1,
 Accounting
    for Leases  Asset
    Retirement Obligations  Goodwill
    and Other Intangible Assets    F-17




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     Valuation
    of Long-Lived Assets  Foreign
    Currency    F-18




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    Accounting
    for Income Taxes    Pension
    and Postretirement Benefits  Accounting
    for Employee Global Mobility and Tax Equalization  F-19




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   Stock-Based
    Compensation    Derivative
    Financial Instruments EITF 00-19, EITF 98-5, (EITF 98-5), EITF 00-27, No. 98-5 (EITF 00-27),
     F-20




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   Accumulated
    Other Comprehensive Income   Foreign currency


Pension andtranslation


post-retirementadjustment


benefit


TotalBalance at December 31, 2004

$
285,955


$



$
285,955Change in foreign currency
    translation


(54,543
)






(54,543
)Change in minimum pension
    liabilities






(13,321
)


(13,321
)Balance at December 31, 2005


231,412



(13,321
)


218,091Change in foreign currency
    translation


30,743







30,743Change in minimum pension
    liabilities, net of tax






8,880



8,880Adoption of SFAS 158, net of
    tax






(11,417
)


(11,417
)Balance at December 31, 2006

$
262,155


$
(15,858
)

$
246,297  Recently
    Issued Accounting Pronouncements       F-21




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  No. EITF 00-19-2, No. EITF 00-19-2). No. EITF 00-19-2 No. EITF 00-19-2 No. EITF 00-19-2 No. EITF 00-19-2. No. EITF 00-19-2, EITF 00-19-2
    3.
    Earnings
    (Loss) per Share   F-22




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    Year Ended December 31,2006


2005


2004Employee stock options


39,869,914



44,920,037



38,416,819Employee stock purchase plan


4,831,754



4,605,505



3,405,662Restricted stock awards and
    restricted stock units


4,333,270



4,275,980



758,551Series A Convertible
    Subordinated Debentures


23,810,200



23,810,200



892,883Series B Convertible
    Subordinated Debentures


19,048,160



19,048,160



694,464April 2005 Convertible Senior
    Subordinated Debentures


30,303,020



18,939,388



July 2005 Convertible Senior
    Subordinated Debentures


5,925,926



2,716,049



Warrants issued in connection with
    the July 2005 Debentures


3,500,000



1,604,167



Softline acquisition obligation
    (Note 9)


735,759



713,163



691,079132,358,003



120,632,649



44,859,458   4.
    Property
    and Equipment    December 31,2006


2005Property and equipment:Internal-use software

$
161,005


$
167,621Equipment


101,026



84,182Leasehold improvements


72,517



54,706Furniture


38,063



31,710Total property and equipment


372,611



338,219Accumulated depreciation and
    amortization:Internal-use software


(96,798
)


(81,815
)Equipment


(72,809
)


(49,778
)Leasehold improvements


(37,859
)


(24,240
)Furniture


(18,753
)


(12,253
)Total accumulated depreciation and
    amortization


(226,219
)


(168,086
)Property and equipment, net

$
146,392


$
170,133  F-23




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    Year Ended December 31,2006


2005


2004Amounts included in:Other costs of service

$
40,502


$
39,205


$
43,485Selling, general and
    administrative expenses


33,521



31,339



35,205$
74,023


$
70,544


$
78,690   5. Business
    Acquisitions, Goodwill and Other Intangible Assets
      ForeignBalance





Currency


BalanceDecember 31,


Impairment


Translation


December 31,2005


Charge


Adjustment


2006Public Services

$
23,581


$



$



$
23,581Financial Services


9,210











9,210EMEA


325,262







33,871



359,133Asia Pacific


68,562







1,840



70,402Latin America


871







47



918Corporate/Other


202











202Total

$
427,688


$



$
35,758


$
463,446   ForeignBalance





Currency


BalanceDecember 31,


Impairment


Translation


December 31,2004


Charge


Adjustment


2005Public Services

$
23,581


$



$



$
23,581Commercial Services


64,188



(64,188
)






Financial Services


9,210











9,210EMEA


485,401



(102,227
)


(57,912
)


325,262Asia Pacific


73,459







(4,897
)


68,562Latin America


836







35



871Corporate/Other


202











202Total

$
656,877


$
(166,415
)

$
(62,774
)

$
427,688    F-24




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
        F-25




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      December 31,2006


2005Other intangible assets:Backlog, customer contracts and
    related customer relationships

$
1,309


$
1,309Market rights


10,297



10,297Total other intangibles


11,606



11,606Accumulated amortization:Backlog, customer contracts and
    related customer relationships


(1,309
)


(1,309
)Market rights


(10,297
)


(8,752
)Total accumulated amortization


(11,606
)


(10,061
)Other intangible assets, net

$



$
1,545    F-26




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  6.
    Notes
    Payable    December 31,2006


2005Current portion (a):Yen-denominated term loan
    (January 31, 2003)

$



$
2,803Yen-denominated term loan
    (June 30, 2003)






1,402Other


360



2,188Total current portion


360



6,393Long-term portion:Series A and Series B
    Convertible Debentures


450,000



450,000April 2005 Convertible Debentures


200,000



200,000July 2005 Convertible Debentures
    (net of discount of $18,510 and $21,946, respectively)


21,490



18,054Other






313Total long-term portion


671,490



668,367Total notes payable

$
671,850


$
674,760     Year

Amount2007

$
3602008


2009


2010


21,490
(b)2011


Thereafter


650,000
(b)Total

$
671,850   (a)
    
    The weighted average interest rate
    on the current portion of notes payable as of December 31,
    2006 and 2005 was 5.6% and 2.4%, respectively.(b)
    
    As described below, the holders of
    the Series A and B Convertible Debentures have the right to
    convert the Debentures into shares of Company common stock only
    upon occurrence of certain triggering events. The April 2005
    Convertible Debentures were convertible upon issuance on
    April 27, 2005 and the July 2005 Convertible
    Debentures were convertible starting on July 15, 2006. Upon
    conversion of these debentures, the Company will have the right
    to deliver, in lieu of shares of common stock, cash or a
    combination of cash and shares of common stock. In addition, the
    holders of the April 2005 Convertible Debentures have the right,
    at their option, to require the Company to repurchase all or
    some of their debentures on April 15, 2009, 2013, 2015 and
    2020. F-27




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  2007
    Credit Facility         
    The affirmative covenantsinclude, among other things:
    the delivery of unaudited quarterly and audited annual financial
    statements, all in accordance with generally accepted accounting
    principles, certain monthly operating metrics and budgets;
    compliance with applicable laws and regulations (excluding,
    prior to October 31, 2008, compliance with certain filing
    requirements under the securities laws); maintenance of
    existence and insurance; after October 31, 2008, as
    requested by the Administrative Agent, maintenance of credit
    ratings; and maintenance of books and records (subject to the
    material weaknesses previously disclosed in the Companys
    2005 Form
    10-K).
    The negative covenants, which (subject to exceptions)
    restrict certain of the Companys corporate activities,
    include, among other things, limitations on: disposition of
    assets; mergers and acquisitions; payment of dividends; stock
    repurchases and redemptions; incurrence of additional
    indebtedness; making of loans and investments; creation of
    liens; prepayment of other indebtedness; and engaging in certain
    transactions with affiliates. F-28




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
         Series A
    and Series B Convertible Subordinated Debentures
    EITF 96-19, (EITF 96-19),
 F-29




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
           F-30




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    April
    2005 Convertible Senior Subordinated Debentures EITF 96-19,
       F-31




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
       July 2005
    Convertible Senior Debentures     EITF 96-19,
     F-32




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
            EITF 98-5 EITF 00-27,
 F-33




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    Discontinued
    Credit Facilities Credit
    Facilities prior to 2005        2005
    Credit Facility   F-34




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
           
    The financial covenants included: (i) a minimum
    U.S. cash collections requirement, (ii) a minimum
    trailing twelve-month EBITDA covenant, (iii) a maximum
    leverage ratio and (iv) a maximum trailing twelve-month
    capital expenditures covenant. The EBITDA and maximum leverage
    ratio was not tested for a quarterly test period if (i) at
    all times during the test period that the borrowing base was
    less than $120,000, borrowing availability was greater than
    $15,000, (ii) at all times during the test period that the
    borrowing base was greater than or equal to $120,000 and less
    than $130,000, borrowing availability was greater than $20,000,
    or (iii) at all times during the test period that the
    borrowing base was greater than or equal to $130,000, borrowing
    availability was greater than $25,000. These ratios were never
    tested, since the Company at all times maintained the minimum
    borrowing base.
    The affirmative covenants included the Company becoming current
    in its SEC periodic filings in accordance to a predetermined
    schedule, repatriation of a $65,000 of cash from foreign
    subsidiaries and the submission to its lender certain weekly and
    monthly reports providing various financial information.
    The negative covenants significantly restricted the
    Companys corporate activities and ability to dispose of
    assets without the lenders consent. F-35




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   
    Standard events of default for a senior secured facility were
    included, as well as default for payments in respect of
    judgments against the Company in excess of $18,000; termination
    of trading of Company stock; certain indictments, convictions or
    the commencement of criminal proceedings of or against the
    Company or any subsidiary.       Terminated
    Yen-Denominated Term Loans and Line of Credit       Early
    Extinguishment of Senior Notes   F-36




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   7.
    Accrued
    Payroll and Employee Benefits    December 31,2006


2005Accrued compensated absences

$
97,123


$
91,587Payroll related taxes


30,482



38,089Employee mobility and tax
    equalization


87,621



82,482Accrued bonus


52,501



32,782Other


76,988



64,570Total

$
344,715


$
309,510  8.
    Other
    Current Liabilities    December 31,2006


2005Acquisition obligation (see
    Note 9)

$
16,564


$
16,133Book overdrafts






810Accrual for loss contracts


24,828



77,920Other


94,445



74,761Total

$
135,837


$
169,624  9.
    Acquisition
    Obligation   F-37




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   10.
    Collaboration
    Agreement   11.
    Commitments
    and Contingencies    
    Claims and investigations arising from its continuing inability
    to timely file periodic reports under the Exchange Act (the
    Exchange Act), and the restatement of its financial
    statements for certain prior periods to correct accounting
    errors and departures from generally accepted accounting
    principles for those years (SEC Reporting Matters);
    Claims and investigations being conducted by agencies or
    officers of the U.S. Federal government and arising in
    connection with its provision of services under contracts with
    agencies of the U.S. Federal government (Government
    Contracting Matters); and
    Claims made in the ordinary course of business by clients
    seeking damages for alleged breaches of contract or failure of
    performance, by current or former employees seeking damages for
    alleged acts of wrongful termination or discrimination, and by
    creditors or other vendors alleging defaults in payment or
    performance (Other Matters).   F-38




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   SEC
    Reporting Matters
  2005
    Class Action Suits   Rule 10b-5 Makor Issues & Rights, Ltd v.
    Tellabs, Tellabs
 2005 Shareholders
    Derivative Demand  Form 8-K,
 F-39




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Series B
    Debenture Suit          SEC
    Investigation  Form 8-K.
 F-40




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    Government
    Contracting Matters
  Government
    Contracts   California
    Subpoena   F-41




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Travel
    Rebate Investigation    Department
    of Interior    United
    States Agency for International Development Contract  United States Agency for International Development
  Core
    Financial Logistics System   F-42




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   General
    Services Administration Audit     Other
    Matters
  Peregrine
    Litigation     In re Peregrine Systems, Inc.
    Securities Litigation,
   F-43




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Hawaiian
    Telcom Communications, Inc.   Telecommunications
    Company   Michael
    Donahue    Canon
    Australia   F-44




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    Transition
    Services Provided By KPMG LLP       Operating
    Leases
       Year ending December 31:2007

$
75,4722008


70,7892009


62,6172010


44,1352011


31,694Thereafter


65,038Total minimum payments required

$
349,745    F-45




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  Other
    Commitments
       12.
    Stockholders
    Equity  Notes
    Receivable from Stockholders      Common
    Stock Repurchase  F-46




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    Preferred
    Stock   Shareholder
    Rights Plan       13.
    Stock-Based
    Compensation  Long-Term
    Incentive Plan     F-47




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      10-year
    Options/Shares


Options OutstandingAvailable





Weighted Averagefor Grant


Number


Price per ShareBalance at December 31, 2005
    (1)


7,609,567



45,676,141


$
11.33Additional shares authorized


25,000,000







Options granted


(600,400
)


600,400



8.70Options exercised










Options forfeited


10,239,263



(10,239,263
)


11.99Restricted stock and stock unit
    awards, net of forfeitures


(7,228,956
)


n/a



8.56Balance at December 31, 2006


35,019,474



36,037,278


$
11.10   (1)
    
    Options granted during the year
    ended December 31, 2005 include 2,000,000 non-statutory
    options issued outside of the LTIP.   F-48




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
          UnrecognizedCompensation


Weighted-AverageCosts


Life in YearsStock options

$
11,052



1.7Restricted stock and stock unit
    awards


41,153



3.1ESPP


4,713



1.0Total

$
56,918



2.6     Year EndedDecember 31,2005


2004Net loss

$
(721,643
)

$
(546,226
)Add back:Total stock based compensation
    expense recorded under intrinsic value method for all stock
    awards, net of tax effects


85,837



5,840Deduct:Total stock based compensation
    expense recorded under fair value method for all stock awards,
    net of tax effects


(173,134
)


(88,690
)Pro forma net loss

$
(808,940
)

$
(629,076
)Loss per share:Basic and dilutedas reported

$
(3.59
)

$
(2.77
)Basic and dilutedpro forma

$
(4.02
)

$
(3.19
)  F-49




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
       WeightedWeighted


AverageStock Price


Risk-Free





Expected


Average


Grant DateExpected


Interest


Expected


Dividend


Exercise


FairVolatility


Rate


Life


Yield


Price


ValueYear ended December 31, 2006


50.80
%


4.69
%


6






$
8.70


$
4.70Year ended December 31, 2005


51.08
%


4.10
%


6






$
7.71


$
4.57Year ended December 31, 2004


63.47
%


3.65
%


6






$
8.85


$
5.38     Blackout
    Period  Form S-8
 F-50




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      Stock
    Option Plans   Outstanding Options


Options ExercisableWeightedNumber


Average


Weighted


NumberOutstanding


Remaining


Average


ExercisableDecember 31,


Contractual


Exercise


December 31,


Weighted AverageRange of Exercise Price

2006


Life (Years)


Price


2006


Exercise Price$ 0.00-$ 5.54


300



5.7


$
5.46



300


$
5.46$ 5.55-$11.10


25,201,799



6.7


$
8.85



21,125,913


$
9.02$11.11-$16.64


5,043,219



4.8


$
13.26



5,043,219


$
13.26$16.65-$27.75


5,647,196



4.0


$
18.03



5,647,196


$
18.03$49.95-$55.50


144,764



3.0


$
55.50



144,764


$
55.0036,037,278
(1)


6.0


$
11.10



31,961,392
(1)(2)

$
11.49Vested or expected to vest at
    December 31, 2006


35,718,395
(1)


6.0


$
11.12   (1)
    
    The aggregate intrinsic values for
    stock options outstanding, exercisable, and vested or expected
    to vest as of December 31, 2006 of $1,885, $1,333, and
    $1,874, respectively, represent the total pre-tax intrinsic
    values based upon the Companys closing stock price of
    $7.87 as of December 31, 2006 which would have been
    received by the option holders had all the in-the-money options
    been exercised as of that date.(2)
    
    The weighted average remaining
    contractual life of stock options exercisable as of
    December 31, 2006 was 5.7 years.       F-51




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
       Restricted
    Stock Units   WeightedAverageNumber


Grant Dateof RSUs


Fair ValueOutstanding at December 31,
    2004





$
Granted


13,764,793



7.61Settled


Forfeited


(496,528
)


7.50Outstanding at December 31,
    2005


13,268,265



7.61Granted


8,048,672



8.48Settled






Forfeited


(900,417
)


7.80Outstanding at December 31,
    2006


20,416,520


$
7.93     
    5,629,048 RSUs generally vest 25% on each January 1 of calendar
    years 2007 through 2010 and settle 25% per year starting
    January 1, 2009; F-52




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   
    1,615,830 RSUs generally either cliff vest and settle three
    years from the grant date or vest and settle over two to four
    years from the grant date; and
    803,794 RSUs vest immediately on the grant date, and generally
    settle on the grant date or settle over one to six years from
    the grant date.                Restricted
    Stock Awards  F-53




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
          Employee
    Stock Purchase Plan 24-month 6-month 6-month
 F-54




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
        14.
    Income
    Taxes  F-55




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2006


2005


2004Current:Federal

$
4,855


$
7,437


$
(33,988
)State and local


1,199



1,400



(11,669
)Foreign


27,648



58,335



14,062Total current


33,702



67,172



(31,595
)Deferred:Federal






40,242



8,930State and local






15,045



267Foreign


(1,305
)


(338
)


34,189Total deferred


(1,305
)


54,949



43,386Total

$
32,397


$
122,121


$
11,791     Year Ended December 31,2006


2005


2004U.S. federal statutory income tax
    rate


35.0
%


35.0
%


35.0
%Nondeductible goodwill impairment


0.0
%


(6.9
%)


(25.3
%)Change in valuation allowance


(40.2
%)


(37.2
%)


(4.6
%)Foreign taxes


2.1
%


(2.3
%)


0.2
%Nondeductible meals and
    entertainment expense


(4.3
%)


(1.1
%)


(1.3
%)State taxes, net of federal benefit


3.7
%


2.1
%


1.0
%Impact of foreign recapitalization


(3.0
%)


(5.5
%)


(3.6
%)Income tax reserve


(4.6
%)


(3.1
%)


(1.5
%)Non-deductible interest


(2.1
%)


(0.5
%)


(0.5
%)Foreign dividends


(2.6
%)


(0.5
%)


0.0
%Other, net


(1.9
%)


(0.4
%)


(1.6
%)Effective income tax rate


(17.9
%)


(20.4
%)


(2.2
%)  F-56




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     December 31,


December 31,2006


2005Deferred income tax assets:Net operating loss carryforwards

$
263,531


$
196,996Accrued compensation


33,329



32,297Reserve for claims


23,323



15,141Revenue recognition


35,977



37,140Restricted stock units


41,954



26,821Other


57,899



68,788Total gross deferred income taxes


456,013



377,183Less valuation allowance


(408,149
)


(338,792
)Total net deferred income tax
    assets


47,864



38,391Deferred income tax liabilities:Property and equipment


13,416



23,642Other


245



313Foreign currency translation


10,184



5,088Stock-based compensation


2,828



2,413Total deferred income tax
    liabilities


26,673



31,456Net deferred income tax asset

$
21,191


$
6,935     December 31,


December 31,2006


2005Current deferred tax assets

$
7,621


$
18,991Non-current deferred tax assets


41,663



20,915Current deferred tax liabilities


(20,109
)


(10,095
)Non-current deferred tax
    liabilities


(7,984
)


(22,876
)$
21,191


$
6,935    F-57




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
               F-58




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    15.
    Transactions
    with KPMG LLP   Infrastructure Services.
     F-59




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     Year EndedDecember 31,2005(1)


2004Occupancy costs

$
2,760


$
23,772Other infrastructure service costs


3,236



52,391Total

$
5,996


$
76,163Amounts included in:Other costs of service

$
2,760


$
23,772Selling, general and
    administrative expenses


3,236



52,391$
5,996


$
76,163   (1)
    
    Decline in charges under the KPMG
    LLP infrastructure agreements from the year ended
    December 31, 2004 to the year ended December 31, 2005
    is due to the expiration of these agreements during 2005.    2004 and Prior Periods Related Party Revenue and Costs of
    Service.
  16.
    Employee
    Benefit Plans  401(k)
    Plan   F-60




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
    Pension
    and Postretirement Benefits         Pension PlansYear Ended December 31,2006


2005


2004Components of net periodic
    pension costService cost

$
7,166


$
6,362


$
5,670Interest cost


4,429



4,167



4,151Expected return on plan assets


(1,075
)


(1,172
)


(1,055
)Amortization of loss


1,026



16



11Amortization of prior service cost


635



774



776Curtailment


120



(833
)


Settlement


(365
)


(232
)


Net periodic pension cost

$
11,936


$
9,082


$
9,553   Postretirement Medical PlanYear Ended December 31,2006


2005


2004Components of postretirement
    medical costService cost

$
1,922


$
1,257


$
1,082Interest cost


735



572



414Amortization of losses


156



73



Amortization of prior service cost


478



478



478Net periodic postretirement
    medical cost

$
3,291


$
2,380


$
1,974  F-61




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  PostretirementPension


medicalPlans


PlanYear Ended


Year EndedDecember 31,


December 31,2006


2005


2006


2005Change in projected benefit
    obligationBenefit obligation at beginning of
    year

$
112,542


$
114,233


$
13,204


$
9,986Service cost


7,166



6,362



1,922



1,257Interest cost


4,428



4,167



736



572Plan participants
    contributions


637



797



188



168Curtailment (1)


(69
)


(1,851
)






Benefits paid


(1,609
)


(1,465
)


(151
)


(207
)Administrative expense


(128
)


(146
)






Actuarial (gain) loss


(8,372
)


10,381



(826
)


1,428Settlement (1)


(6,986
)


(5,300
)






Effect of exchange rate changes


11,550



(14,636
)






Projected benefit obligation at
    end of year

$
119,159


$
112,542


$
15,073


$
13,204Change in plan assetsFair value of plan assets at
    beginning of year

$
24,332


$
28,001


$



$
Actual return on plan assets


664



2,244







Employer contributions


3,440



3,888



(37
)


39Employee contributions


637



798



188



168Benefits paid


(1,609
)


(1,465
)


(151
)


(207
)Administrative expense


(128
)


(145
)






Settlement (1)


(6,986
)


(5,300
)






Effect of exchange rate changes


1,885



(3,689
)






Fair value of plan assets at end
    of year

$
22,235


$
24,332


$



$
Reconciliation of funded
    statusFunded status

$
(96,924
)

$
(88,210
)

$
(15,073
)

$
(13,204
)Unrecognized loss


N/A



18,533



N/A



3,408Unamortized prior service cost


N/A



6,683



N/A



2,504Net amount recognized

$
(96,924
)

$
(62,994
)

$
(15,073
)

$
(7,292
)Amounts recognized in
    Accumulated Other Comprehensive IncomePrior service cost

$
4,896


$



$
2,026


$
Net actuarial loss


6,510







2,426



Total accumulated other
    comprehensive income

$
11,406


$



$
4,452


$
Amounts recognized in the
    Consolidated Balance SheetsNoncurrent assets

$
231


$
3,632


$



$
Current liabilities


(1,821
)






(229
)


Noncurrent liabilities


(95,334
)


(66,626
)


(14,844
)


(7,292
)Net amount recognized

$
(96,924
)

$
(62,994
)

$
(15,073
)

$
(7,292
)Accumulated benefit obligation

$
105,894


$
98,087


$
15,073


$
13,204   (1)
    
    The settlement and curtailment
    related to a decrease in participants in the Switzerland Plan
    due to a reduction in workforce. F-62




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     Pension


Postretirement medicalplans


planYear Ended


Year EndedDecember 31,


December 31,2006


2005


2006


2005Weighted-average assumptions
    used to determine benefit obligationsDiscount rate


4.2
%


4.0
%


5.8
%


5.6
%Rate of compensation increase


3.0
%


3.0
%






Weighted-average assumptions
    used to determine net periodic benefit costDiscount rate


3.6
%


4.0
%


5.6
%


5.8
%Expected long-term return on plan
    assets


4.5
%


4.5
%






Rate of compensation increase


3.0
%


3.0
%






     Pension PlanDecember 31,


December 31,2006


2005Asset categoryBonds


49.0
%


47.0
%Equities


30.0



30.0Real estate


14.0



13.0Other


7.0



10.0Total


100.0
%


100.0
%     Pension


Postretirementplans


medical plan2007

$
3,579


$
2292008


3,667



2672009


3,586



3492010


3,651



4452011


3,760



577Years
    2012-2016


21,694



5,754$
39,937


$
7,621  F-63




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     December 31,


December 31,2006


2005Health care cost trend rate
    assumed for next year


9.0
%


10.0
%Rate to which the cost trend rate
    is assumed to decline (the ultimate trend rate)


5.0
%


5.0
%Year that the rate reaches the
    ultimate trend rate


2015



2011     1%-Point


1%-PointIncrease


DecreaseEffect on total service and
    interest cost

$
633


$
(519
)Effect on Postretirement Benefit
    Obligation

$
2,486


$
(2,071
)         December 31, 2006Prior to SFAS 158


SFAS 158


Post SFAS 158Adjustments


Adjustments


AdjustmentsOther assets

$
89,049


$
(5,296
)

$
83,753Deferred income taxes


37,907



3,756



41,663Total assets


1,940,780



(1,540
)


1,939,240Accrued payroll and employee
    benefits


342,665



2,050



344,715Total current liabilities


1,035,561



2,050



1,037,611Accrued employee benefits


108,260



7,827



116,087Total liabilities


2,106,664



9,877



2,116,541Accumulated other comprehensive
    income


257,714



(11,417
)


246,297Total liabilities and
    stockholders deficit

$
1,940,780


$
(1,540
)

$
1,939,240  F-64




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
     Deferred
    Compensation Plan EITF 97-14,
      17.
    Lease and
    Facilities Restructuring Activities  F-65




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
          Lease andFacilitiesBalance at December 31, 2003

$
55,898Charges to operations


11,699Payments


(19,329
)Other (a)


2,074Balance at December 31, 2004


50,342Charges to operations


29,581Payments


(28,315
)Other (a)


(1,011
)Balance at December 31, 2005


50,597Charges to operations


29,621Payments


(14,142
)Other (a)


842Balance at December 31, 2006

$
66,918   (a)
    
    Other changes in restructuring
    accrual consist primarily of foreign currency translation
    adjustments.  18.
    Segment
    Information  F-66




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
      Year ended December 31, 2006Financial


Commercial











Corporate/Public Services


Services


Services


EMEA


Asia Pacific


Latin America


Other (1)


TotalRevenue

$
1,339,358


$
399,331


$
554,806


$
703,083


$
360,001


$
82,319


$
5,105


$
3,444,003Operating income


234,309



111,192



57,229



96,180



68,205



4,465



(770,849
)


(199,269
)Depreciation and amortization


10,080



852



1,089



10,573



2,795



712



49,467



75,568Interest expense (2)


25,915



4,715



6,382



3,637



9,717



2,836



(16,020
)


37,182Total assets (3)


418,999



63,342



113,948



573,489



124,068



24,714



620,680



1,939,240   Year ended December 31, 2005Financial


Commercial











Corporate/Public Services


Services


Services (4)


EMEA (5)


Asia Pacific


Latin America


Other (1)


TotalRevenue

$
1,293,390


$
379,592


$
663,797


$
662,020


$
312,190


$
75,664


$
2,247


$
3,388,900Operating income


195,204



84,926



(117,376
)


(47,917
)


39,098



(213
)


(715,278
)


(561,556
)Depreciation and amortization


11,042



1,027



879



6,856



4,328



732



47,946



72,810Interest expense (2)


27,443



5,610



9,430



1,208



8,107



2,807



(21,220
)


33,385Total assets (3)


469,205



94,781



166,331



515,606



127,757



16,674



582,072



1,972,426   Year ended December 31, 2004Financial


Commercial











Corporate/Public Services


Services


Services


EMEA (5)


Asia Pacific


Latin America


Other (1)


TotalRevenue

$
1,343,670


$
326,452


$
654,022


$
642,686


$
328,338


$
79,302


$
1,312


$
3,375,782Operating income


243,770



79,443



86,142



(317,864
)


12,767



10,264



(608,696
)


(494,174
)Depreciation and amortization


10,499



1,636



3,224



10,071



4,238



554



51,925



82,147Interest expense (2)


29,779



4,839



9,927



233



5,698



1,520



(33,286
)


18,710Total assets (3)


462,681



96,186



217,575



701,582



149,627



21,920



533,136



2,182,707   (1)
    
    Corporate/Other operating loss is
    principally due to infrastructure and shared services costs,
    such as facilities, information systems, finance and accounting,
    human resources, legal and marketing.(2)
    
    Interest expense is allocated to
    the industry segments based on accounts receivable and unbilled
    revenue.(3)
    
    Industry segment assets include
    accounts receivable, unbilled revenue, certain software and
    property and equipment directly attributed to the industry
    segment, purchased intangible assets and goodwill. All other
    assets are not allocated to industry segments and are classified
    as corporate assets.(4)
    
    Commercial Services includes a
    $64,188 goodwill impairment charge for the year ended
    December 31, 2005.(5)
    
    EMEA includes a $102,227 and
    $397,065 goodwill impairment change for the years ended
    December 31, 2005 and 2004, respectively. F-67




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
   Geographic
    Information   Year ended December 31,2006


2005


2004Property &





Property &





Property &Equipment,





Equipment,





Equipment,Revenue (2)


Net (3)


Revenue (2)


Net (3)


Revenue (2)


Net (3)North America (1)

$
2,293,495


$
112,262


$
2,336,779


$
129,545


$
2,324,144


$
149,056EMEA


703,083



26,930



662,020



31,228



642,686



39,220Asia Pacific


360,001



4,886



312,190



6,832



328,338



12,442Latin America (4)


82,319



2,314



75,664



2,528



79,302



2,685Total Outside of North America


1,145,403



34,130



1,049,874



40,588



1,050,326



54,347Corporate/Other


5,105







2,247







1,312



Total

$
3,444,003


$
146,392


$
3,388,900


$
170,133


$
3,375,782


$
203,403   (1)
    
    The North America region includes
    the Public Services, Commercial Services and Financial Services
    segments. The North America is comprised of operations in the
    United States and Canada. The Company reports financial
    information for these two countries as one region. Canadian
    operations do not contribute materially to the
    North America region.(2)
    
    Revenue by geographic region is
    reported based on where client services are supervised.(3)
    
    Property and equipment, net of
    depreciation, related to the geographic region in which the
    assets reside.(4)
    
    The Latin America region includes
    Mexico. F-68




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  19.
    Results
    by Quarter   Quarterly periods during the year endedDecember 31, 2006December 31,


September 30,


June 30,


March 31,2006


2006


2006


2006Revenue

$
874,331


$
843,248


$
892,680


$
833,744Costs of service:Costs of service


749,437



683,318



698,631



732,470Lease and facilities restructuring
    charge


23,372



961



2,488



2,800Total costs of service


772,809



684,279



701,119



735,270Gross profit


101,522



158,969



191,561



98,474Amortization of purchased
    intangible assets






515



515



515Selling, general and administrative
    expenses


209,630



173,323



176,384



188,913Operating income (loss)


(108,108
)


(14,869
)


14,662



(90,954
)Insurance settlement, net of legal
    fees














38,000Interest/other expense, net


(2,180
)


(5,906
)


(5,351
)


(6,337
)Income (loss) before taxes


(110,288
)


(20,775
)


9,311



(59,291
)Income tax expense (benefit)


(2,047
)


8,858



12,164



13,422Net loss

$
(108,241
)

$
(29,633
)

$
(2,853
)

$
(72,713
)Loss per sharebasic and
    diluted

$
(0.51
)

$
(0.14
)

$
(0.01
)

$
(0.34
)   Quarterly periods during the year endedDecember 31, 2005December 31,


September 30,


June 30,


March 31,2005


2005


2005


2005 (1)(2)Revenue

$
790,921


$
831,401


$
895,245


$
871,333Costs of service:Costs of service


762,149



694,458



717,942



826,778Lease and facilities restructuring
    charge


9,094



882







19,605Total costs of service


771,243



695,340



717,942



846,383Gross profit


19,678



136,061



177,303



24,950Amortization of purchased
    intangible assets


567



567



566



566Goodwill impairment charge


166,415











Selling, general and administrative
    expenses


222,687



200,379



164,360



163,441Operating income (loss)


(369,991
)


(64,885
)


12,377



(139,057
)Interest/other expense, net


(7,203
)


(6,553
)


(12,422
)


(11,788
)Income (loss) before taxes


(377,194
)


(71,438
)


(45
)


(150,845
)Income tax expense (benefit)


36,581



(1,014
)


4,841



81,713Net loss

$
(413,775
)

$
(70,424
)

$
(4,886
)

$
(232,558
)Loss per sharebasic and
    diluted

$
(2.06
)

$
(0.35
)

$
(0.02
)

$
(1.16
)   (1)
    
    During 2005, the Company identified
    certain errors in its previously reported financial statements.
    Because these changes are not material to the Companys
    financial statements for the periods prior to 2005 or to 2005
    taken as a whole, the Company corrected these errors in the
    first quarter of 2005. These adjustments included entries to
    correct errors in accounting for certain foreign tax
    withholdings, income taxes, revenue, and other miscellaneous
    items. Had F-69




---



##### 



BEARINGPOINT,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS(Continued)
 (in
    thousands, except share and per share amounts)
  these errors been recorded in the
    proper periods, the impact of the adjustments on the first
    quarter of 2005 would have been an increase to revenue and gross
    profit of $726 and $4,927, respectively, and a decrease to net
    loss of $15,445.(2)
    
    In the first quarter of 2005, the
    Company recorded a valuation allowance of approximately $57,300
    primarily against U.S. deferred tax assets to reflect its
    conclusion that it is more likely than not that these benefits
    would not be realized.  20.
    Supplemental
    Financial Information   Balance at


Charge to





Balance atBeginning


Costs and


Deductions-


EndAllowance for Doubtful Accounts

of Period


Expenses (a)


Write Offs


of PeriodYear Ended December 31, 2006

$
9,326


$
(464
)

$
(2,935
)

$
5,927Year Ended December 31, 2005


11,296



5,334



(7,304
)


9,326Year Ended December 31, 2004


17,240



(1,057
)


(4,887
)


11,296   (a)
    
    Expense reflected in other costs of
    service in the Consolidated Financial Statements  Balance at


Charged to


Charged


Credited to


Balance atBeginning


Income Tax


to Other


Income Tax


End ofIncome Tax Valuation Allowance

of Period


Provision


Accounts (b)


Provision


PeriodYear Ended December 31, 2006

$
338,792


$
76,775


$
(7,418
)

$



$
408,149Year Ended December 31, 2005


114,775



223,031



986







338,792Year Ended December 31, 2004


88,037



24,757



1,981







114,775   (b)
    
    Other accounts include deferred tax
    accounts.  Tax





TaxReserve





ReserveBalance at


Charged to


Charged


Credited to


Balance atBeginning


Income Tax


to Other


Income Tax


End ofIncome Tax Reserve

of Period


Provision


Accounts (c)


Provision


PeriodYear Ended December 31, 2006

$
89,530


$
13,795


$
5,174


$



$
108,499Year Ended December 31, 2005


37,965



51,417



148







89,530Year Ended December 31, 2004


28,403



7,997



1,565







37,965   (c)
    
    Other accounts include goodwill and
    currency translation accounts. F-70